China's industrial production and retail sales accelerated in October, bolstering forecasts for economic growth to exceed 10 per cent this quarter for the first time in more than a year.

Production rose 16.1 per cent from a year earlier, the most since March 2008, the statistics bureau said at briefing in Beijing today. Retail sales gained an annual 16.2 per cent in October, and urban fixed-asset investment climbed 33.1 per cent in the first 10 months of this year, it said.

The strengthening recovery in the world's third-largest economy may spark concern that consumer and asset prices will climb next year, and put pressure on policy makers to pare their stimulus measures. The government may also face increasing international calls to allow the yuan to appreciate, after it halted gains last year to aid exporters.

''Beijing will need to tighten policy soon as the nation's recovery will get an extra boost from stronger external demand,'' said Brian Jackson, a strategist on emerging markets at Royal Bank of Canada in Hong Kong. ''Waiting too long increases the risk of high inflation and asset-price bubbles.''

The yuan may start to gain against the US dollar from the first quarter of next year, when interest rates may also climb from a five-year low of 5.31 per cent, Jackson said.

Ma Delun, a deputy governor at the central bank, told reporters in Mumbai yesterday that the nation will maintain its ''loose'' monetary policy for now, citing the challenges of weak external and domestic demand.

Obama visit

US President Barack Obama may raise the yuan in talks with Chinese leaders in Beijing next week, after the US Treasury Department last month criticized ''the recent lack of flexibility'' in the currency.

European Central Bank President Jean-Claude Trichet said last week that a stronger Chinese currency would help the global economy and the International Monetary Fund has called the yuan ''significantly undervalued.'' Japanese Vice Finance Minister Yoshihiko Noda told reporters last week that it is ''desirable for the yuan to be flexible.''

China has maintained the currency's value at around 6.83 against the US dollar since July 2008, after allowing it to rise 21 per cent in the previous three years. Yuan forwards indicated yesterday that traders expect the currency to resume gains, climbing 3 per cent in the next year.

Consumer prices fell by 0.5 per cent in October from a year ago, the smallest drop since declines began in February, and producer prices dropped 5.8 per cent, according to the bureau.

'Sharp' rebound

The increase in retail sales last month was the biggest since December last year excluding seasonal distortions in January and February. SAIC Motor Corp., the biggest domestic automaker, sold 240,300 vehicles as the nation's passenger-car sales surged.

''China has rebounded sharply from the slowdown earlier this year, and this momentum looks set to continue into 2010,'' Jackson said.

Moody's Investors Service on Nov. 9 raised China's debt rating outlook to ``positive'' from ''stable,'' citing the government's success in steering the nation through the global crisis and strong financial position, including $US2.273 trillion ($2.5 trillion) of foreign-currency holdings.

The Chinese economy will expand 10.5 per cent in the fourth quarter from a year earlier, according to the median forecast in a Bloomberg News survey of economists.

Besides building 270,000 low-rent homes, 200,000 kilometers of rural roads and nearly 1500 kilometers of railway under a 4 trillion yuan ($640 billion) stimulus plan, China's government has pressed banks to lend, flooding the economy with cash. The World Bank cautioned last week that the nation may risk asset bubbles and a ''misallocation of resources.''

Urban property prices jumped 3.9 per cent in October, the biggest increase in 14 months, the statistics bureau said yesterday. The value of sales jumped 79.2 per cent in the first 10 months of 2009 from a year earlier.

Bloomberg News