MercoPress. South Atlantic News Agency

China's industrial production hectic pace softens

China's industrial output grew at its slowest annual rate in almost two years last October according to the latest official release. Although production increased by 14.7% over October 2005, it was down from the 16.1% growth in September.

A Beijing business daily also reported Thursday that China's international reserves in October reached a record one trillion 96 million US dollars which represents a 21 billion US dollars jump over the end of September.

October's industrial output figures were the weakest since December 2004. Chinese factories have been shifting down a gear as Beijing tightens some controls on credit and investment. But despite the slowdown in output growth, Chinese retail sales and export demand remained strong during October.

No official report on the magnitude of international reserves has been released but the increase seems to be lower than the trade surplus of October, 23.8 billion US dollars.

October was also the fifth month running that the growth of international reserves is lower than the combined trade surplus and the new direct foreign investment in China, underlines the press report.

This situation had led some analysts to believe that significant funds are leaving China but given the poor reliability of official figures and the lack of transparency in the financial system, it's hard to reach an agreement as to the motives of the outflow.

Some believe it could be "speculative money" that begun pouring in at the beginning of the year when an appreciation of the Chinese currency was thought to be imminent and now is looking for other options.

Another reason could be the repatriation of profits from foreign companies or even Chinese investors going overseas.