BEIJING: China said Wednesday that massive government spending was paying off as a new wave of data showed the world’s third-largest economy continued to strengthen following the worst global crisis in decades.

Industrial production and retail sales picked up pace in October, while consumer prices continued to fall, the National Bureau of Statistics said, expressing confidence that eight per cent growth was well within reach for 2009.

‘Based on the October data, we have more reason to believe that the foundation for and confidence in achieving the full year growth target have further strengthened,’ bureau spokesman Sheng Laiyun told reporters.

China’s industrial output, which shows activity in the millions of factories and workshops around the country, expanded by 16.1 per cent in October from a year ago.

Retail sales, the main measure of consumer spending, rose 16.2 per cent in October from a year ago, up from 15.5 per cent in September.

The Chinese government sees consumer spending as a key factor in boosting the economy.

‘The government policies, especially those to boost domestic demand, to a large extent improved residents’ production and living conditions,’ Sheng said.

‘I think the contribution of consumption to economic growth will continue to rise because we can expect a consumption boom before the new year and the Chinese new year.’ The nation’s consumer price index, the main gauge of inflation, fell 0.5 per cent in October compared with the same month a year earlier, after falling 1.1 per cent in the first nine months of the year.

Fixed-asset investment in urban areas rose 33.1 per cent in the January to October period, the statistics bureau said, after growing 33.3 per cent in the first three quarters of 2009.

Sheng said China’s October trade surplus reached 24 billion dollars, up from 12.93 billion dollars in September.

Analysts said the data was positive, but warned the recovery was still linked to the government’s four-trillion-yuan (586-billion-dollar) stimulus package unveiled a year ago and massive bank lending.

‘China’s recovery has extended into the fourth quarter and this momentum looks set to continue into 2010,’ said Brian Jackson, a Hong Kong-based strategist at the Royal Bank of Canada.

‘Growth is still heavily reliant on policy stimulus, easy liquidity and government-directed investment, but we expect to see stronger external demand in the months ahead.’ Ben Simpfendorfer, an economist at Royal Bank of Scotland in Hong Kong, said the heavy industrial manufacturing sector — cars and metals — was leading the recovery thanks to government spending.

‘The pace of growth is great but I still have issues with the quality of growth,’ Simpfendorfer told AFP.

‘What we are looking for is the recovery to broaden.’Policymakers and analysts have expressed confidence in China’s recovery after the economy grew 8.9 per cent in the third quarter — the fastest pace in a year.

That compares with 7.9 per cent growth in the second quarter and 6.1 per cent in the first three months, the slowest pace in more than a decade.

The World Bank last week raised its 2009 growth forecast for China to 8.4 per cent, following similar moves by the International Monetary Fund and the Asian Development Bank.

While Beijing has been given the thumbs-up for the way it has navigated the global crisis, it is being urged to rebalance the economy.

‘Now the government has basically succeeded in dampening the impact of the global crisis, it is a good time to concentrate ... on rebalancing the economy and getting more growth out of the domestic economy on a sustainable basis,’ World Bank senior economist Louis Kuijs said last week.

‘This calls for more emphasis on consumption and services and less emphasis on investment and industry.’— AFP