China economy: Latest numbers add to recovery hopes

A consumer buying vegetables in China Rising consumer prices, and particularly food prices, have been a hot political topic in China

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China has reported encouraging economic data, indicating that growth in the world's second-largest economy may be rebounding.

Industrial production, retail sales and fixed-asset investment all rose more than expected in October, from a year earlier.

Meanwhile, the inflation rate fell, giving room to policymakers to employ stimulus measures to support growth.

The numbers come as China's growth rate has hit a three-year low.

Factory output rose 9.6%, while retail sales jumped 14.5%, indicating that domestic demand was holding up.

The growth in domestic consumption is key for China's economy, as demand for its exports - one of the biggest drivers of its growth until 2008 - has taken a back seat amid a slowdown in its main markets of the US, Europe and Japan.

Growth support

Start Quote

Clearly the lower inflation rate gives them room to proceed with more stimulus measures and growth drivers”

End Quote Fraser Howie Co-author, Red Capitalism

Prompted by a decline in foreign sales and continued slowdown in its economy, China's policymakers have taken various steps to boost its domestic consumption this year.

The government has cut interest rates twice since June and also lowered the amount of money that banks need to keep in reserve on three occasions in the last few months to boost lending.

In a further bid to raise domestic spending, Beijing has approved new infrastructure projects worth more than $150bn (£94bn).

Analysts said that while China was unlikely to announce a major stimulus programme, the low inflation rate meant that the government could continue to boost the existing measures without having to worry about their impact on consumer prices.

Consumer prices grew by 1.7% from a year earlier, the slowest pace since January 2010.

"Clearly the lower inflation rate gives them room to proceed with more stimulus measures and growth drivers," Fraser Howie, co-author of Red Capitalism, told the BBC.

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