• Mainland China's economy remained strong in the first 11 months of 2007, being supported by solid domestic and overseas demand.
  
  
• Although export growth has eased as a result of the reduction and removal of export tax rebates in 2007 and the recent slowdown in global economic growth, strong retail sales in the domestic market continued to support a relatively strong industrial output.
  
  
• Consumer price inflation, however, surged to an 11-year high of 6.9% in November as food prices continued to soar.
  
  
• To prevent the economy from overheating, the government raised banks' required reserve ratio ten times in 2007 to the record level of 14.5%, and hiked banks' lending rates six times during the year. Monetary control will tighten further in 2008.

Industrial output growth slowed but remained strong

Industrial output grew by a real rate of 17.3% year-on-year in November 2007, down from the 17.9% recorded in October and 18.9% in September (Exhibit 1). Slower export growth since the second half of 2007 was the main reason for the deceleration in industrial output growth, though the government's escalating monetary tightening also played a role.

Despite the recent slowdown, industrial output still grew by a real rate of 18.5% year-on-year in the first 11 months of 2007, faster than the 12.5% gain for the whole of 2006. With exports likely to continue to grow at double digit pace in 2008 and domestic consumption remaining strong, the growth of industrial output is not expected to slow significantly in the coming months.

Click here to download full report.