Factory output surges across China

Chinese industrial production surged in August, in a sign that activity in the world's second largest economy is stabilising.

Factory output grew by 10.4 per cent on last year, the fastest pace in 17 months and above most economists' expectations. The positive figures followed strong readings on exports earlier this week.

China also reported yesterday that retail sales grew 13.4 per cent year on year in August, a slightly higher rate than in July. Investment grew by 21.5 per cent on last year and was up 20.3 per cent over the first eight months of 2013. Growth of fixed asset investment in water utilities and environmental protection were up 33.4 per cent and 20 per cent on the same month a year earlier.

"The better-than-expected figures showed the recovering momentum of China's economy is stronger than market expectations," Li Huiyong of Shenyin & Wanguo Securities said.

But other economists voiced doubts about sustainability. "The dominant role of infrastructure played in the sudden turnaround confirms our concern over the sustainability," Wei Yao of Société Générale said.

China is attempting to move from a growth model powered by heavy investment and high saving, to one based more on consumer consumption.