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Cary Huang

16.2pc growth in first two months of the year driven by exports, spending

The mainland's industrial output rose 16.2 per cent year on year in January and last month, driven by  brisk investment, booming exports and rising consumer spending.

Value-added industrial output reached 1.11 trillion yuan  for the first two months of this year, the National Bureau of Statistics said in a release posted on its website yesterday.

Economists expect the mainland's factories to continue to churn out goods at a rapid pace in the coming months, although oversupply and sliding profit margins have hit production in some sectors.

'Strong industrial production growth confirms our view that China's growth is gaining more momentum,' wrote Hong Liang, chief China economist for Goldman Sachs' Asia economic research group.

Figures for the individual months were not provided because statisticians feared monthly figures might create distortions due to the timing of the Lunar New Year. The holiday began in January this year and February last year.

The January and February figures suggest the continuation of robust output growth this year, the first year of the mainland's 11th Five-Year Programme (2006-2010).

Industrial output rose 16.4 per cent last year, 16.7 per cent in 2004 and 17 per cent in 2003, propelled by a boom in investment, much of it linked to exports, according to figures from the bureau.

The mainland economy has expanded at an annual rate of nearly 10 per cent over the past five years. However, the government has projected a moderate 7.5 per cent annual growth rate for next five years in an effort to promote balanced and sustainable growth.

Rapid expansion has led to excess capacity in some sectors, such as steel and cars, and the bottleneck in transportation, energy and other raw materials. Premier Wen Jiabao  and  economic policymakers called for increased efforts to 'control the expansion of production capacity' during the  annual session of the National People's Congress.

In the first two months of the year, total vehicle output jumped 41 per cent year on year and car production soared 83 per cent, the bureau's release said. Steel output grew 17 per cent and output of steel products gained 21 per cent. Cement production rose 21 per cent.

However, more manufactured goods are being left on the shelves, with the sales-to-production ratio falling 0.28 percentage points to 96.99 per cent.

Export shipments reached 745.4 billion yuan in the first two months, up 24.2 per cent year on year.

Ms Liang warned that inflationary pressure would build up in the near future and predicted 'moderate monetary tightening' in the first half of the year.

China's M2, the broad measure of money supply, rose 18.8 per cent last month to 30.45 trillion yuan, according to the People's Bank of China. The growth target for this year is 16 per cent.



Industrial output keeps steady pace