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China August factory output, retail sales beat expectations

Workers operate machinery on the assembly line at a Lyric Robert factory, operated by Guangdong Li Yuanheng Intelligent Automation Co., in Huizhou, Guangdong province, China, on Monday, April 18, 2016.
Qilai Shen | Bloomberg | Getty Images
Workers operate machinery on the assembly line at a Lyric Robert factory, operated by Guangdong Li Yuanheng Intelligent Automation Co., in Huizhou, Guangdong province, China, on Monday, April 18, 2016.

China's industrial output grew the fastest in five months in August as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom.

Industrial output rose 6.3 percent in August, surprising analysts who had expected growth of 6.1 percent. Output increased 6.0 percent in July.

China's steel industry, in particular, has perked up in recent months as capacity cuts and production curbs have boosted prices and profits, while a government infrastructure spree and housing boom have spurred demand for building materials.

Retail sales also beat expectations, expanding by 10.6 percent after a rise of 10.2 percent the prior month. Analysts had forecast an increase of 10.3 percent.

Fixed asset investment was unchanged at 8.1 percent over the first eight months of the year, the statistics bureau said on Tuesday.

Analysts had expected an increase of 8.0 percent. Still, the rate of growth in investment remained the slowest since December 1999.

Growth in investment by state firms fell slightly to 21.4 percent in Jan-August, from 21.8 percent in Jan-July.

But private investment grew just 2.1 percent, the same pace as in January-July, and remaining at record lows.

Chinese policymakers have focused on improving the operating environment for the private sector this year, including calling for better access to credit and fair market access. But private firms still complain of unfair competition with state firms and restricted access to some markets, especially in key parts of the services sector.

Trade data last week showed stronger domestic demand as imports rose for the first time in nearly two years, while exports fell less than expected.

While economic activity in China has cooled this year, it appears less at risk of a hard landing than feared in 2015. The broader economy remains relatively stable, albeit sluggish, despite continued weakness in the massive export sector and overcapacity plaguing many industries.

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