Dec. 11 (Bloomberg) -- China’s industrial production grew more than economists estimated in November, signaling a strengthening recovery in the world’s third-biggest economy.

Factory output climbed 19.2 percent from a year earlier, the biggest increase since June 2007, and more than the 18.2 percent median estimate in a Bloomberg News survey of 25 economists. Consumer prices rose 0.6 percent, the first increase in 10 months, the statistics bureau said in Beijing today.

A $586 billion stimulus package, record bank lending and incentives for purchases of cars and home appliances are supporting industrial output, which will get another boost as exports recover. China’s government this week adjusted its growth policies by extending subsidies for rural consumers and increasing payments for automobile trade-ins, while scrapping a tax break on property sales.

“Beijing’s fine-tuning of stimulus measures shows that it’s getting more comfortable with the economy’s recovery,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government may start to exit stimulus via curbing investment and loans from April.”

The Shanghai Composite Index added 6.04, or 0.2 percent, to 3,260.31 as of 10:08 a.m. local time, erasing a loss of as much as 0.3 percent.

Expect Stronger Yuan

Twelve-month non-deliverable forwards were little changed at 6.6550 per dollar as of 10:23 a.m. in Hong Kong, indicating traders expect the yuan to strengthen 2.6 percent in a year, according to data compiled by Bloomberg.

China’s growth accelerated to 8.9 percent in the third quarter, helping Asia to lead the recovery from the global economic slump.

“The Chinese economy is enjoying considerable momentum as we head toward 2010,” said David Cohen, an economist with Action Economics in Singapore. “It’s consistent with the expectation that Beijing may around the middle of next year tolerate an appreciation of the currency to help contain inflationary pressures.”

November’s gain in industrial output was boosted by the comparatively low level a year earlier, when exports and growth slumped after the collapse of Lehman Brothers Holdings Inc.

Retail Sales

Retail sales climbed 15.8 percent in November from a year earlier, compared with 16.2 percent in October, according to the statistics bureau. Urban fixed-asset investment rose 32.1 percent in the January-to-November period from a year earlier after climbing 33.1 percent through October, today’s data showed.

Producer prices fell 2.1 percent last month from a year earlier, after dropping 5.8 percent in October.

While President Hu Jintao pledged this week to maintain a “moderately loose” monetary policy and a “proactive” fiscal stance, China’s banking regulator plans to slow new lending in 2010, a person familiar with the matter said this week.

The regulator aims for a limit of between 7 trillion yuan and 8 trillion yuan of loans for all of next year, the person said. The credit boom has raised the risk of asset bubbles and bad loans.

Banks extended 9.21 trillion yuan of new local-currency loans in the 11 months through November, the central bank said today. New lending in November totaled 294.8 billion yuan, more than the 250 billion yuan median estimate of economists.

Overseas Investors

Forecasts for China to maintain the fastest growth of any major economy are encouraging companies to boost production and spurring overseas investors to expand.

China Petroleum & Chemical Corp., the country’s biggest refiner, said this month that it plans to expand the capacity of its second-biggest oil-processing plant by a third. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, said last month that it will build a new factory worth 5 billion yuan to tap an auto market set to overtake the U.S. as the world’s largest this year.

The government is wrestling with overcapacity and excess production in some industries, such as steel, where an oversupply is depressing profits for mills including Baoshan Iron & Steel Co.

China’s cabinet and the nation’s top economic planner said this week that they will increase policy flexibility, manage inflation expectations and curb speculative property purchases. Property prices in 70 cities rose at the fastest pace in 16 months in November and the benchmark Shanghai Composite Index has jumped almost 80 percent this year.

Food and energy price increases helped to bring deflation to an end, said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong.

Food Costs

November’s 0.6 percent gain in consumer prices from a year earlier was driven by a 3.2 percent increase in food costs, today’s figures showed. Non-food prices fell 0.7 percent. Consumer prices climbed 0.3 percent from the previous month.

The government last month approved increases of as much as 8 percent to gasoline, diesel and jet fuel prices and raised retail power charges for the first time in 16 months.

“The balance of risk is gradually shifting from growth to inflation,” said Tim Condon, head of Asia research in Singapore at ING Groep NV. “Some of the