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China's Production, Retail Sales Data Signal Economic Recovery

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China's industrial production and retail sales data released over the weekend signaled that economic momentum is picking up in the fourth quarter.

Figures from the National Bureau of Statistics showed that industrial production growth accelerated to a 5-month high of 6.2 percent in November from 5.6 percent in October, exceeding the consensus estimate of 5.7 percent.

Likewise, retail sales advanced 11.2 percent annually after rising 11 percent in the prior month and was better than the 11.1 percent growth forecast by economists.

Fixed asset investment climbed 10.2 percent in the year-to-date period in November, the same rate of growth as seen in ten months to October.

Official reports generally supported the picture of a moderate recovery in the industrial sector fueled by higher credit growth and a slight improvement in exports, Allan von Mehren, chief analyst at Danske Bank, noted.

The economist said he still looks for more rate cuts from the People's Bank of China to ease the debt burden of Chinese companies.

The PBoC last week hinted that it would reduce the yuan's link to the dollar. The China Foreign Exchange Trade System, a unit of PBoC, introduced a new yuan index on Friday that measures the value of currency against a basket of currencies instead of dollar.

It suggests that the People's Bank sees the link to the dollar as a straightjacket from which it wants to escape, Mark Williams, chief Asia economist at Capital Economics, said.

The goal is to keep the renminbi's value broadly stable rather than be compelled to have it follow the dollar higher, as it has over the past couple of years, the economist added.

The announcement from the PBoC came ahead of this week's U.S. Federal Reserve, when the U.S. central bank is widely expected to begin tightening rates.

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