The mainland economy is showing signs of bottoming out, according to a Dresdner Kleinwort Benson report. If the trend was confirmed in the coming months, Premier Zhu Rongji would have achieved a soft landing for the economy, said the authors of the report - 'First Positive News Out of Asia: Tentative signs that China is bottoming'. Analysts Hugh Peyman and Qu Hongbin said growth trends in household income, industrial output and retail sales were bottoming out and that the latest figures for last month supported this. Fixed-asset investment by state-owned companies rose 26.9 per cent last month from the same month a year ago, the biggest gain since May 1995, the State Statistics Bureau said. At the same time, retail sales rose 9.3 per cent from the previous corresponding period to 231.5 billion yuan (about HK$215.2 billion), the biggest gain since January. 'The first shoots of recovery appear to be visible. From fixed-asset investment to per capita incomes, retail sales to housing sales, televisions to air-conditioners, signs of a recovery are mounting,' the analysts said. 'At the very least, the economic slowdown is decelerating. 'The statistical evidence will become clearer over the next three to four months as the impact of the Chinese Government's reflationary measures is felt,' the report said. Over the next 12 months, the economy will be boosted by the issue of 270 billion yuan worth of bank-recapitalisation bonds and 100 billion yuan in infrastructure bonds. The report emphasised that fixed-asset investment grew by 10.3 per cent in the first quarter, 16 per cent in the second and by 22 per cent in July. The mainland's housing reforms are also expected to have an effect. The report said the beginnings of a mortgage market boosted growth in housing sales from single digits in December to more than 50 per cent in July. This has led to increases in cement and glass output. These increases were slowly starting to trim deflationary trends and could be the first signs of the death of deflation, the report said. 'Investors who have been fretting about the possible devaluation of the Chinese currency should not overlook these signs of recovery. 'If China reflates successfully, it will be seen by some as a recovery model for other Asian countries stuck in recession,' Dresdner Kleinwort Benson said. The report also expressed the hope that a turnaround in the mainland could help lift other Asian economies - especially the natural-resource economies such as Malaysia and Indonesia - by raising demand for timber, rubber and palm oil.