China's strong factory output further sign of economic recovery

China's factory output expanded in August at its fastest rate this year in a new sign the world's second-largest economy is recovering from its deepest slump since the 2008 global crisis.

Industrial production rose 10.4 per cent, accelerating from July's 9.7 per cent, government data showed Tuesday.

The signs of economic revival will ease pressure on Chinese leaders who want to focus on longer-term structural reforms analysts say are needed to keep economic growth strong.

"We have got a picture of a broad-based recovery from external demand to domestic demand, and from consumption to investment," said Bank of America economists Xiaojia Zhi and Ting Lu in a report.

Economic growth declined to a two-decade low of 7.5 per cent in the second quarter but trade, factory output, auto sales and other indicators suggest the slowdown is levelling out.

Communist leaders want to nurture more self-sustaining growth driven by domestic consumption instead of trade and investment. They responded to the unexpectedly sharp decline in growth this year with higher spending on railway construction and a small business tax cut, but have resisted pressure for a more ambitious stimulus.

Export growth accelerated to 7.2 per cent in August from July's 5.1 per cent.

Also in August, consumer inflation edged down to 2.6 per cent from July's 2.7 per cent. Wholesale prices that have declined steadily for more than a year fell less sharply in another sign of growing demand.

"With a number of other emerging markets mired in turmoil as the U.S. Fed prepares to taper its QE(quantitative easing)program, we believe China stands out as a relatively safer haven with its resilient growth, stable currency and strong balance of payments," said Bank of America's Zhi and Lu.