By Caijing chief economist Shen Minggao

From Caijing Online

Decelerating industrial output in November, attributable to weak domestic and external demand, is the result of unbalanced industrial structure - and the downtrend is likely to continue through the first half of 2009 said Shen Minggao, Caijing’s chief economist.

China’s industrial output rose 5.4 percent year-on-year in November, 2.8 percentage points lower than October, the National Bureau of Statistics reported Monday.

The pace of growth, sliding for five months in a row, was down 11.9 percentage points from the same period last year. Possible turnaround in the second half of 2009 is hinged on the effect of the 4 trillion yuan stimulus package, Shen said.

If the stimulus package aids downstream industries, it could help stabilize the economy. Too much investment on infrastructure and upstream industries will put more pressure on overcapacity, aggravating the “hot upstream, cold downstream” imbalance.

From this perspective, supporting moderate–income housing, boosting consumption through higher grain prices and tax cuts, as well as opening up service industries can better stimulate demand and get “more bang for the buck,” he said.