CHINA's key industrial production accelerated to a five-month high in July, flying in the face of predictions the world's second-biggest economy was slowing.

Industrial production which measures output at factories, workshops and mines rose 9.7 per cent year-on-year.

Authorities also announced steady expansion in retail sales and fixed asset investment, and a benign inflation figure of 2.7 per cent, unchanged on last month.

The Australian dollar was given a boost by the data.

Fortescue Metals Group chairman Andrew Forrest told The Sunday Times last month commentators keen to "write off" China had got it wrong.

"The Chinese don't write themselves off Western commentators do that," he said.

Hong Kong-based economist for Bank of America Merrill Lynch, Lu Ting, said the "overall figures are actually very good, especially the industrial output figure".

China's gross domestic product grew 7.8 per cent in 2012, its slowest annual pace in 13 years.

Growth slipped to 7.7 per cent in the January-March period this year and slowed further to 7.5 per cent in the second quarter, raising alarm bells over possible deeper weakness.

Beijing has set a goal of 7.5 per cent growth this year and ANZ economists Liu Li-Gang and Zhou Hao said in a report that the better-than-expected July data made it "more likely to be attainable".

Concerns over a hard landing had "largely diminished".

"This should facilitate and accelerate the structural reform agenda in China," they said.

The Government has largely faced down mounting pessimism over the economy and refused to undertake major stimulus efforts as it vows to restructure China's economy to make it less reliant on exports and investment, and driven more by the power of the country's consumers.

Exports and imports, which had contracted in June, rebounded in July, growing 5.1 per cent and 10.9 per cent year-on-year respectively.

And retail sales rose 13.2 per cent in July compared with the same month last year.

Originally published as China's economy is recovering