Although a lower comparison base contributed to China's strong economic data in November, a rosy future was widely expected as a V-shaped recovery consolidated in the world's third largest economy.

Economic conditions had been greatly improved both domestically and externally as China's economy consolidates its recovering trend, economic analysts said Friday.

Foreign trade, a major drive in the country's economy, reversed a downward trend for 12 consecutive months, up 9.8 percent year on year in November, according to China's General Administration of Customs.

Exports continued to drop in November by 1.2 percent from a year earlier, but the rate of decline greatly eased from the 10.7-percent fall in October. Imports rose 26.7 percent from a year earlier, compared with a 6.4-percent decline in October, reflecting improving domestic demand.

Zhang Yansheng, director of Institute of Foreign Trade of the National Development and Reform Commission, believed that an initial economic rebounds in China's major trade partner in the third quarter had helped push up the figures.

A series of duty rebates policies aims at boosting the ailing exports since last year has also paid off, he said.

Improving external demand had also contributed to rising imports, said Wang Li, a researcher with the Chinese Academy of Social Sciences (CASS), or the government's top think-tank.

Up to 55 percent of China's exports were done in processing trade, which help boost raw material imports, she said.

Commodity prices also registered its first monthly growth since January, as China's consumer price index (CPI), a main gauge of inflation, rose 0.6 percent year on year in November, figures from the National Bureau of Statistics (NBS) showed.

"A mild rise in prices would benefit boosting economic growth and encouraging employment, especially in times of economic recovery," said NBS spokesman Sheng Laiyun.

The situation seemed even better with the country's retail sales, industrial output and fixed-asset investment on continued rise last month.

China's industrial production had picked up its speed with November growth accelerated to 19.2 percent year on year, following a 16.1-percent increase in October.

"The growth has reflected China's improving economic condition and firming recovery," said Sheng.

Although the strong economic data partly resulted from the depressing year-earlier figures, which had brought down the comparison base, China's economy outlook is optimistically improving, said Wang.

China is undergoing a V-shaped recovery, the bottom of which had appeared in March and April this year, she said.

Inflation or inflation expectation?

The rise in CPI, though in line with previous forecasts, had sparked concerns over potential inflation risks as possible property prices bubbles had been heatedly debated among economic analysts.

However, Sheng quashed the existence of an inflation problem and said the rise in CPI was a result of surging food prices and housing costs.

Food prices, which account for about a third of the CPI, went up by 3.2 percent year on year in November, while housing costs, including rents, construction expenses and property management fees, rose 0.8 percent month on month in the same period.

Sheng attributed the rising food prices to earlier snowfall this year, which disrupted transportation, and said resource prices, including electricity, water and natural gas, had brought up housing costs.

The positive CPI was based on a lower comparison figure in the corresponding period last year together with the strong economic rebound and rising demand, said Zhuang Jian, a senior economist with the Asian Development Bank.

"A 0.6-percent rise is a very slight growth, even if there would be an inflation, it is a moderate and tolerable one," he said.

But inflation expectations were strong, said Wang Tao, analyst with the UBS Securities, who attributed the upward trend to this year's credit boom and a rapid growth in property prices, which is not included in the CPI.

China had pumped a total of 9.21 trillion yuan (about US$1.35 trillion) into its economy in the first 11 months of the year, with new yuan-denominated lending in November standing at 294.8 billion yuan, the People's Bank of China, the central bank, said Friday.

At the Central Economic Work Conference, the country's key annual economic planning meeting, the government put managing inflation prospects as one of its priorities for next year's economic work, along with ensuring a stable and relatively fast economic growth and adjusting economic structure.

"For China, deflation fear is gone, and inflation expectation is something that should be dealt with caution now," said Yuan Gangming, an economic researcher at Tsinghua University.

More focus on economy restructuring

The encouraging November data further guaranteed the achievement of an 8-percent economic growth target this year, leaving the government more room to adjust the economic development pattern.

At the Central Economic Work Conference, the government decided to focus more on transforming the economic development pattern next year while maintaining stable and comparatively fast economic growth.

Analysts believed adjusting development pattern in the government's statement meant it was to enhance the role of domestic demand and break the country's growth from dependence on export and government pump-priming to drive post-crisis growth.

Chinese government has announced a series of measures to boost domestic demand since the fourth quarter last year as exports waned after the global financial crisis. These included tax cuts for auto and property purchases and subsidies for home appliances purchase in rural areas.

The country's economy rose 7.7 percent year on year in the first nine months. Consumption contributed 4 percentage points to the GDP growth, investment 7.3 percentage points while exports subtracted 3.6 percentage points.

In the latest effort to spur consumer spending with improved residents' purchasing power, Zhang Ping, minister in charge of the National Development and Reform Commission, said Wednesday that the government would step up research on optimizing the income distribution mechanism and continue to raise the earnings of the middle and low income groups.

China's "growth is likely to be more broad-based next year, with the increased contributions from consumption and net exports, while investment becomes a less influential source of growth," Peng Wensheng, analyst with the Barclays Capital, said in an e-mail to Xinhua.

Peng expected China's economy to grow 8.6 percent year on year in 2009 and 9.6 percent in 2010.

Gross capital investment was expected to contribute 7 percentage points to the forecasted 8.6-percent GDP increase this year, consumption would take 4 percentage points while net exports would subtract 2.4 percentage points, Peng said. In 2010, gross capital investment, consumption and net exports was expected to contribute 4.9 percentage points, 4.2 percentage points and 0.5 percentage points to China's growth, respectively.

(Xinhua News Agency December 12, 2009)