Industrial output grew a strong 16.9 percent year-on-year during the first two months of this year, the National Bureau of Statistics (NBS) announced on Tuesday.

Although the rise was limited to 7.6 percent in February, when the country celebrated the week-long Lunar New Year holiday, output surged 20.9 percent in January. Total value of industrial output during the two months was 903.4 billion yuan (US$108.8 billion).

The metallurgical and electronics sectors were the biggest contributors. Metallurgy output surged 26.8 percent in the period, contributing 12.5 percent to the total growth rate, while electronic products jumped 19.1 percent, accounting for 9.8 percent of overall growth.

The figures were above most forecasts. Industrial output growth had been largely slowing since it peaked at 23.2 percent in February 2004, although increases in August and September raised concerns that the effectiveness of economic cooling measures might be fading.

The Asian Development Bank's senior economist Zhuang Jian pointed out that although growth in the first two months was strong, it is too early to say whether the figures indicate a real rebound.

Zhang Xueying, a senior economist with the State Information Center, said that the government nevertheless has to be on its guard. "This means the government's macro-control measures have had little impact on the speed of the economic development, although the measures helped cool down investment. That's why the government has decided to improve and beef up its macro-control measures this year."

Liang Hong, an economist with Goldman Sachs (Asia), said strong industrial production growth resulted mainly from strong export demand.

Exports by industrial companies climbed 33.4 percent year-on-year to 583.8 billion yuan (US$70.3 billion) during the first two months.

Industrial output is an important indicator of economic growth, contributing more than 50 percent to China's gross domestic product. Industrial output gained 11.1 percent last year, while GDP rose 9.5 percent.

"Given the data released so far, particularly today's industrial production, we expect fixed asset investment to be on the firm side as well when it is released today," Liang said. "We believe this will give a clearer signal on firmer growth prospects for the year."

Zhuang expects China's GDP to grow about 8.5 percent during the first quarter, but Zhang believes the figure could reach 9.0 percent despite the constraints still imposed by bottlenecks in energy and transportation.

The government has taken a series of measures, including tightening credit and curbing unwanted fixed asset projects, to try to cool the economy. The People's Bank of China (PBOC), the central bank, raised the benchmark interest rate by 0.27 percentage point last October, the first increase in nine years.

(China Daily, China.org.cn March 16, 2005)