China data shows world's workshop back in business

By Aileen Wang and Alan Wheatley

BEIJING (Reuters) - Chinese factory output growth surged to a 19-month high in October, showing the world's third-largest economy has firmly put the worst of the global financial crisis behind it.

Other figures released on Wednesday showed a dip in the pace of investment and loan growth as the impact of the initial burst from a bank-financed 4 trillion yuan ($585 billion) economic stimulus package, announced a year ago, tapered off.

Exports and imports also undershot market forecasts, falling from year-earlier levels for the 12th month in a row.

But economists said China was maintaining the momentum of its recent recovery, which has made it a certainty that Beijing will surpass its target of 8 percent growth for 2009 as a whole.

What's more, the large number of investment projects still in the government's pipeline, a sharp rebound in real estate spending and the huge volume of loans issued this year virtually guarantee stronger GDP growth in the coming year.

"Domestic demand as a whole is improving in a sustainable manner," said Chris Leung, China economist at DBS Bank in Hong Kong. "China anchors stability in Asia and expectations of economic stability in the region."

The data helped lift Asian share markets, with the MSCI index of Asia Pacific stocks outside Japan rising 0.6 percent. The materials and consumer staples sectors outperformed.

With the economy now on a more solid footing, markets are focusing on when China might start unwinding its stimulus.