Until October, industrial output, following falls in sales of consumer goods and fixed investment, had been on a downward trend.

Worries about deflation deepened last month when the bureau revealed China's overall economic growth slowed to about 8 per cent in the third quarter - the lowest in recent years.

Economists said the latest figure might suggest a recovery which was expected to gather pace following Beijing's decision last month to announce a sharp cut in interest rates.

In October the ratio of industrial sales to output was 95.91 per cent, up 0.2 percentage points over the same month last year.

However, the bureau said state-owned or -controlled companies registered a 6.9 per cent growth in output to 97.8 billion yuan, slightly down from the first three quarters this year.

Some economists said many state firms had been cutting production to clear up inventories since the beginning of the year.

State Economic and Trade Commission Minister Wang Zhongyu , warned that many of the state firms might go bankrupt as a result of the government's ambitious efforts to turn around the entire state sector in the next three years.

The bureau said the collectively-owned firms posted a strong recovery, with their industrial output up 13.1 per cent in October.

It said private firms and foreign-funded enterprises also posted a fast growth rate at 15.1 per cent.

However, it said energy production growth continued its downward trend.