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 Still, analysts believe more policy steps are needed to weather
nagging headwinds from a cooling property market, risks from high
domestic debt levels, and weak global demand as financial markets
brace for interest rate rises by the U.S. Federal Reserve.
"Real interest rates are still high due to falling producer prices,"
Wang Jun, senior economist at the China Centre for International
Economic Exchanges (CCIEE), a Beijing-based think-tank.
"It's still necessary to cut interest rates to support economic
growth and combat deflation."
Factory output grew an annual 6.2 percent in November, data from the
National Bureau of Statistics(NBS) showed, quickening from October's
5.6 percent and beating expectations of 5.6 percent.
Growth in China's fixed-asset investment, one of the main drivers of
the economy, rose 10.2 percent in the first 11 months, unchanged
from the gain in January-October, and higher than an expected 10.1
percent rise.
Retail sales grew an annual 11.2 percent in November - the strongest
expansion this year - compared with 11.0 percent in October.
Analysts had forecast 11.1 percent growth in November.
"While low base could be the factor driving the headline growth, we
still have to acknowledge that China's data are illustrating signs
of stabilization, albeit at a low level," said Zhao Hao, senior
economist at Commerzbank in Singapore.
The data came after weak trade and inflation readings earlier this
week, which underscored the persistent slack in the economy.
WEAK DEMAND, OVERCAPACITY
The world's second-biggest economy has been hit by weak demand at
home and abroad, factory overcapacity and challenges posed by its
transition to a consumption-led growth model from one reliant on
investments.
With the Fed poised to raise interest rates for the first time in
almost a decade at next week's review, the risk of intensifying
capital outflows has added to Beijing's policy challenge.
Premier Li Keqiang has recently pledged to step up "supply-side"
reform to generate new growth engines in the economy while tackling
factory overcapacity and so-called zombie firms.
With its trade sector ailing, there are also signs China is ramping
up efforts to send more excess production abroad with tax cuts for
the export sector.
China's output of key industrial commodities including coal and
steel remained weak in November amid chronic oversupply as slowing
construction demand took its toll.
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"Supply-side management should be supported by loose fiscal and
monetary policy," Li Huiyong, an economist at Shenyin & Wanguo
Securities said.
Li said the economy faced "increased uncertainties" from a cooling
property market, excess factory capacity, high debt levels and
Beijing's anti-corruption drive. He expects the central bank to cut
interest rates by 50 basis points in the next 12 months, on top of
more cuts in bank reserve ratios.
Over the past year Chinese authorities have launched the most
aggressive policy stimulus since the 2008/09 global financial
crisis, including cutting interest rates six times since late 2014
and lowering bank reserve requirements.
They have also taken other steps, including an announcement on
Friday to lock-in more investments as Beijing tries to put a floor
under the economy.
But the government has been struggling to reach its economic growth
target of around 7 percent this year, which would be the weakest
pace in a quarter of a century. Many analysts suspect actual growth
is lower than official figures suggest.
WEAKER PROPERTY INVESTMENT
A cooling property market has weighed heavily on China's economy
over the past year. Home sales and prices have increased in bigger
cities over recent months, helped by a barrage of government
measures.
Data issued by the statistics bureau on Saturday showed property
investment grew 1.3 percent in the first 11 months of 2015 from a
year earlier, slowing from 2.0 percent rise in January-October and
hitting the weakest pace since early 2009.
While noting the risk posed by large inventories of unsold homes,
China's President Xi Jinping said last month that China needed to
reduce housing overhang to ensure sustainable development of its
property market.
Xi has said that China must keep annual average growth of no less
than 6.5 percent over the next five years to hit the country's goal
of doubling gross domestic product and per capita income by 2020
from 2010.
(Reporting by Kevin Yao; Editing by Shri Navaratnam)
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