Intensive campaign by the Chinese government to curb investment and credit is having an impact on the country’s economy, with its industrial output growing at its slowest annual rate in 22 months, much lower than the forecasts. Even though the output in October increased by 14.7% on a year-to-year basis, it fell from the 16.1% growth witnessed in September. However, the retail sales and export demand remained strong during the month. Increasing interest rates and monetary tightening measures introduced by the Chinese government are believed to be main reasons behind this slow-down.

Industrial output growth in China, which is considered to be one of the key economic indicators in this fastest growing economy, is at its lowest level since December 2004, after slipping from a high of 19.5% in the month of June. Li Huiyong, an analyst at Shenyin & Wanguo Securities in Shanghai, said that the output figures were surprisingly low and the government may not go further with their tightening measures, since its effects are already being felt on the economy.

Qu Hongbin, chief China economist for HSBC in Hong Kong, said that industrial output weakened in October, in spite of the increasing retail sales and buoyant export demand, indicating that the growth in fixed-asset investments has been slowing. He added that more data on investment figures is required to assess the magnitude of the investment slow-down.

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