INFLATION A PRIORITY

Industrial output in the first two months of 2011 rose 14.1 percent year-on-year from a 13.5 percent pace in December, vaulting past market expectations of a 13.3 percent increase.

Reflecting the surge in global commodity costs earlier this year, producer price inflation jumped in February to 7.2 percent from 6.6 percent a month earlier.

China's top leaders have declared that their priority this year is to control inflation. To meet the official goal of keeping inflation to a 4 percent average this year, the government has raised interest rates three times and banks' reserve requirements five times since October, while also using a series of direct controls to cap price rises.

The next dose of tightening may be just around the corner.

"The higher-than-expected CPI may push the government to raise interest rates or the reserve requirement ratio in March," said Liu Dongliang, analyst with China Merchants Bank in Shenzhen.

LENDING CONTROLS

The most important part of Beijing's efforts has been reining in banks, which unleashed a torrent of credit over the past two years, swamping the economy in cash.

Domestic media reports have said that new loans in February were slightly more than 500 billion yuan ($76 billion), a steep drop from January and considerably less than expected. If confirmed, that would suggest that China has finally gained traction in controlling the excesses of banks.

In a statement on Friday, the Chinese central bank said it would ensure that there is an "appropriate" amount of liquidity in the economy this year, guiding credit growth at a reasonable pace.