A steadying economy would be a relief to Chinas leaders, who worry a further slowdown could derail their efforts to rebalance the economy away from its credit- and investment-driven growth model to one in favour of consumption.
Factory output rose 9.7% in July from a year earlier, the fastest growth since output grew 9.9% over January and February, National Bureau of Statistics data showed. It followed Thursdays surprisingly strong trade data and, given targeted measures since mid-year to support small firms and exporters, added to signals the economy may have found its base after slowing in nine of the past 10
While we would not say that China is out of the woods yet, the recent rise in sentiment has been noticeable, and talks that economic growth will fall below 7% in 2013 now seems rather far fetched," said Chester Liaw, an economist at Forecast in Singapore. The government has made clear it will accept some slowdown as it pushes through its reforms, but has also expressed confidence of meeting its 7.5% growth target this year which would be Chinas slowest growth in 23 years.
Chinas CSI300 index reversed early losses after the data to end up 0.4% and post its biggest weekly gain in a month.
July inflation steady, policy seen neutral
Chinas consumer inflation steadied in July although factory-gate deflation persisted for a 17th month, official data showed on Friday, pointing to monetary policy on hold as Beijing tries to arrest a slowdown that has run for more than two years. The data came a day after surprisingly strong trade figures, and analysts said that while the worlds second-largest economy may be showing signs of stabilising, it was too early to conclude it had started to turn around. The central bank was hawkish on inflation in a report published last week, and so the data is unlikely to lead to a change in its policy rates, despite calls from some economists for a rate cut to help struggling companies.