U.S. News

China's Industrial Production Hums as Economy Extends Boom


China's industrial production grew by a robust 17.4% in April from a year earlier, reflecting rebounding exports and the underlying strength of the world's fourth-biggest economy.

Against a backdrop of flush liquidity and runaway stock and property prices, data in recent days could lead Beijing to raise interest rates further in the coming weeks and take other steps to avert potential overheating in the economy, economists say.

Production of everything from coal to textiles decelerated only slightly from March's 17.6% annual rise and the 18.5% increase logged in January and February combined, but remained elevated in line with the country's broader economic activity.

"I think the number confirms robust growth, especially in the export sector," said Ben Simpfendorfer, a strategist with Royal Bank of Scotland in Hong Kong. Demand for factories to crank out more goods has soared as overseas markets have maintained their appetite for Chinese exports despite gradual appreciation in the yuan.

Solid consumption growth within the nation's borders, as incomes have climbed, has also stoked resurgent factory output this year after tightening measures dampened industrial production growth in the final three months of 2006.

Wednesday's numbers follow other government data releases that showed China's trade surplus widening to $16.9 billion in April from $6.9 billion in March and annual lending and credit growth remaining uncomfortably high.

Analysts were divided over whether the modest easing in industrial production growth pointed to a possible deceleration in the broader economy. Economists polled by Reuters had on average expected a rise of 17.5%.

Chen Wenzhao, an analyst with Changjiang Securities in Shanghai, said that the latest figure may suggest the economy could slow modestly in the second quarter.

But Li Ruoyu from the State Information Centre, a think-tank under China's cabinet, said that the jury was still out.

"The slowdown in industrial production in April was very modest, and it is still too early to say whether the economic growth will slow in the second quarter," Li said. "Considering the strong growth in consumption and exports, industrial production will remain strong in the coming months," she said.