China's gradual recovery is underway (2)

Industrial production growth accelerated to 9.6 percent year on year in October from 9.2 percent in September and the month-on-month growth rate increased by 0.8 percentage point, according to the official data.

This echoes a strong rebound in electricity production data, which picked up to 6.4 percent year on year in October from an unexpectedly low 1.5 percent in September. The recovery in the industrial production reading was mainly driven by heavy industry, where production accelerated to 9.7 percent year on year from 9.3 percent prior, while growth in light industry inched up to 9.1 percent year on year from 9.0 percent. The pick-up in heavy industrial production was more pronounced in the month-on-month growth number, indicating that an increase in investment projects may be around the corner.

Official fixed asset investment growth was 20.7 percent year on year in the first 10 months of the year, translating into marginally higher monthly growth of 22.2 percent year on year in October, the highest reading in 11 months.

By sector, fixed-asset investment in infrastructure maintained robust growth of 25 percent year on year in October, while manufacturing investment grew 20 percent year on year, similar to previous readings. Growth in total planned investments in newly started projects continued to accelerate to 35.2 percent year on year in October from 31.2 percent in September, suggesting that more investment projects will be rolled out in the coming months.

Real sales growth accelerated to 13.5 percent year on year in October from 13.2 percent in September, supported by holiday consumption and solid income growth.

Growth in investment in residential real estate picked up to 13.2 percent year on year in October from 9.9 percent in September. Growth in floor space sold rebounded strongly to 12.2 percent year on year from an average of 8.7 percent in the third quarter, which is encouraging. The decline in area under construction continued to narrow. We believe this indicator could well move back into positive territory in the first quarter of 2013, and make a positive contribution to the economy in the first half of 2013.

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