Page last updated at 07:10 GMT, Thursday, 12 March 2009

China factory output growth slows

Chinese textile worker
The global economic downturn is hitting China's growth

Industrial production growth in China slowed in January and February, as the downturn in the world economy knocked demand for exports.

Output in the two months was up 3.8% from a year ago, against a 5.7% rise in December, official figures have shown.

China has been battered by a fall in demand for its goods, with exports falling a record 25.7% in February.

But there are signs that the government's stimulus package is having an impact as bank lending increased.

Production in February alone rose 11%, though this figure was flattered by the fact that February this year had five more working days than February last year because of the timing of the Chinese New Year holidays.

The rise in February output also reflected a 42.5% rise in concrete production, reflecting the impact of higher construction spending and the government's stimulus package.

Chinese policymakers hopes that the 4 trillion yuan ($585bn; £423bn) package will reduce the country's reliance on exports as increased spending on large construction projects boosts the economy.

In February, new loans quadrupled from the same period a year ago to 1.07tn yuan. Although this was down from a record 1.62tn yuan in January, it was still high by historical standards.

"The strong credit and money growth bodes well for a a policy-driven...recovery by mid-year, making China the first to recover among major economies," said Wang Qing, an economist at Morgan Stanley.

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