China's industrial output surged in October to its strongest levels so far this year on strong domestic demand for cars and mobiles phones.

There is a shift in production to China

Michael Kurtz, economist, Bear Stearns Asia

Factory production in China soared 14.2% in October, compared with a year ago, the National Bureau of Statistics said.

Production for export by foreign firms, which are increasingly using China as a global manufacturing base, also fuelled the increase.

China's strong performance contrasted with data from Japan, where the trade surplus shrank and the government predicted orders for machinery would decline by 6.5% in the final three months of this year.

Contrasting neighbours

Economists view Japan's machine orders data as a good indication of capital spending, and therefore business confidence.

In China, however, the picture was one of robust growth.

The biggest increase in output in October was in cars - the latest must-have purchase for middle class Chinese.

Car production rose 81.8% on a year ago to 100,000 vehicles, while output of mobile phones jumped 66.2%.

Eager shoppers

Production of circuit boards used in consumer electronics goods was 35.9% higher.

"You are seeing domestic demand growth, coming from an extremely low base," said Bear Stearns Asia economist Michael Kurtz.

Factories producing for export helped fuel growth with a 14.8% increase in output, the National Statistics Bureau said.

"There is a shift in production to China," confirmed Mr Kurtz.

Struggling Japan

In Japan, orders for machinery fell 1.7% in the July, August and September compared to the previous three month period.

Eleven months of growth in Japan's current account, which measures trade in goods and services, came to an end in September, underscoring the weakness of the world's second largest economy.

Japan's current account surplus was 6.8% lower than a year ago, at 1.17 trillion yen ($9.8bn).

The figures disappointed economists, who had forecast a surplus of 1.28 trillion yen.