Chinese dragon fires up with record growth

The industrial might of the Red Dragon showed no sign of waning in October after Chinese manufacturers increased production at the fastest pace for six months.

The world's second-largest economy was buoyed by an influx of new business with domestic demand rather than exports driving the growth, according to two purchasing managers' surveys.

The official purchasing managers' index compiled by the China Federation of Logistics Purchasing rose to 54.7 in the month from 53.8 in September, shattering expectations. Another survey compiled by HSBC climbed to 54.8 from 52.9.

The increase was all the more impressive as October is usually a more sluggish month for production due to the week-long National Day holiday.

"The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October," Goldman Sachs economists Yu Song and Helen Qiao said. HSBC said the figures put China on track for annualised growth of about 9% in the final quarter of the year.

But a spokesman for the federation warned against over-optimism and said rising inflation was putting increased cost pressures on businesses.

He warned: "We need to note that economic expansion might slow in the future as investment and export growth both slowed in the third quarter."