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A vendor reaches out for a chicken as he waits for customers at a market in Huaibei, Anhui province, December 9, 2012. Growth in China's factory output and retail sales jumped to eight-month highs in November as consumer inflation bounced off 33-month lows in the latest sign that its economy is snapping out of a protracted slump. (STRINGER/REUTERS)
A vendor reaches out for a chicken as he waits for customers at a market in Huaibei, Anhui province, December 9, 2012. Growth in China's factory output and retail sales jumped to eight-month highs in November as consumer inflation bounced off 33-month lows in the latest sign that its economy is snapping out of a protracted slump. (STRINGER/REUTERS)

Upswing continues for China’s economy Add to ...

The world’s second-largest economy is continuing to gather momentum, according to a raft of data released Sunday, bolstered by a trickledown of stimulus measures and early confidence in China’s new top leaders.

Both factory output and retail sales improved on October’s results, up 10.1 per cent and 14.9 per cent year-on-year respectively. Inflation ticked up slightly to 2.0 per cent, up from a 33-month low of 1.7 per cent in October, while the producer price index fell to 2.2 per cent.

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Fixed asset investment was also up, now 20.7 per cent year-on-year in the first 11 months of 2012, according to the National Bureau of Statistics, to a total 32.62 trillion yuan ($5.28 trillion U.S.).

With trade numbers due to come Monday, the data suggests a weak economic recovery by year’s end, as predicted by most economists, seems to be underway. The Chinese Academy of Social Sciences, a state-connected think-tank, last week predicted China’s economic growth will hit 7.7 per cent this year, just passing the official yearly target of 7.5 per cent.

China’s economic growth slowed to 7.4 per cent in the third quarter as government’s efforts to control surging inflation and an overheated property market collided with recession in Europe and slowdown in the United States.

Government-driven easing measures, including more regional investment in infrastructure, have helped put more life into the economy. But economists say the markets are also encouraged by early signs of reform from the country’s new leadership team led by soon-to-be president Xi Jinping, anointed at the 18th Communist Party Congress last month.

“This does not just depend on the fundamental economic issues but also depends on the political background,” said Yu Miaojie, an associate professor of economics in Beijing University’s China Centre for Economic Research. “So far the market is quite optimistic with this new team, especially with the efforts on anti-corruption.”

China’s remarkably active online community has been awash with reports from the latest anti-corruption campaigns, from sex scandals involving twin mistresses to accusations of bribery for hundreds of millions of dollars’ worth of state-backed loans, some of which have even been picked up in the country’s often colourless state-backed newspapers.

Mr. Xi called the anti-corruption drive a critical task for the survival of the Communist Party; the leader’s own family has been investigated by Western media for their accumulation of hundreds of millions of dollars. But the momentum in that campaign is also feeding hopes that further economic and financial reforms cannot be far away.

The annual Economic Work Conference of China’s senior officials, which will set the tone for next year’s economic direction, is also expected to be held before the end of this month.

Still to come this week are the monthly numbers on China’s imports and exports, traditionally a major factor in economic performance and which have been heavily impacted by decreasing demand from the U.S. and Europe.

“The trade data [Monday] will be scrutinized for signs that a warming domestic economy is feeding into import demand – the last few months’ import data have remained weak. Equally important is whether the recent strength in exports can be sustained,” wrote economists Mark Williams and Wang Qinwei for Capital Economics in London.

However, inflation is once again a concern in considering further economic stimulus, since many of China’s 1.3 billion people still spend a disproportional amount of their income on food. Rising food costs can contribute further to mounting social unrest fed by the country’s massive income gap.

“The November growth rate was largely attributable to a surge in food costs,” Wang Jun, a researcher at the China Center for International Economic Exchanges, told state news agency Xinhua.

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