China's industrial output growth adds to recovery hopes

Textile factory in central China's Anhui province The manufacturing sector has been one of the key drivers of China's growth in recent years

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China's industrial production rose by more than expected in August, the latest sign that the world's second-largest economy may be on the mend.

Factory output climbed by 10.4% from a year earlier. Most analysts had forecast a figure closer to 9.9%.

Other data released on Tuesday showed that retail sales and fixed asset investment also rose during the month.

China has been trying to boost its economy after its growth rate slowed for two quarters in a row.

"The better-than-expected figures showed the recovering momentum of China's economy is stronger than market expectations," said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

"The three key drivers of China's economy, including exports, investment and consumption, have shown [an] obvious rebounding trend in August."

'Solid domestic demand'

Start Quote

Continued solid domestic demand growth provided an important cushion during the slowdown and remains key now”

End Quote Louis Kuijs RBS

The numbers come just days after China reported a strong growth in exports during August.

The export and manufacturing sectors have been key drivers of China's economic growth in recent years. But a slowdown in demand from key markets such as the US and Europe had hurt their growth recently.

However, conditions in those economies, especially the US, have been improving - providing a boost to these sectors.

"The recent improvement is largely because of better exports amidst improving global demand," said Louis Kuijs, chief China economist with RBS in Hong Kong.

At the same time, Chinese authorities have taken steps to help boost domestic demand to try and rebalance the economy.

Analysts said these measures, which include the suspension of value-added tax and turnover tax for small businesses, had helped boost consumption at home and sustain a high growth rate.

"Continued solid domestic demand growth provided an important cushion during the slowdown and remains key now," said Mr Kuijs.

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