Production at plants and factories across China was up 17.5 percent last month from a year earlier, the National Bureau of Statistics said.

While impressive by most nations' standards, in China it marked the second consecutive month of slowing growth in industrial output, after July's 18 percent and June's 19.4 percent, according to previously published statistics.

"It's inevitable that measures adopted by the government to curb resource-intensive enterprises have had an impact on industrial output," said Sun Fanghong, a Shenzhen-based analyst with Pingan Securities.

"At the same time, the government is placing fairly strict curbs on commercial banks' lending after steep growth in investment in the first half," she said.

Auto production, a main driver of growth in China, was among sectors that expanded at a slower rate in August than in July, according to Thursday's data from the statistics bureau.

Production of passenger cars increased 17.1 percent in August, down from 27.9 percent growth in July, the bureau said.

"Softer export demand may be a factor behind the industrial production moderation," said Hong Liang, a Hong Kong-based economist with Goldman Sachs.

Last month's 24.97-billion-dollar trade surplus was the second-largest on record, but it disguised the fact that export growth was down rather abruptly to 22.7 percent from 34.2 percent the month before.

Again, the government may have been instrumental with policies such as a gradual reduction in tax incentives for companies producing for the world markets, analysts said.

The policy consequences of slowing industrial output are, however, likely to be limited, as it is not a key measure monetary authorities are looking at when deciding what to do next.

Inflation is a much more pivotal gauge, and figures released this week showed it to be at 6.5 percent, the highest in over a decade.

"The 11-year record-high inflation rate reported for August is likely to keep policy makers on a tightening stance in the near term despite the moderation in industrial output growth," Goldman Sachs' Liang said.

This creates a clear incentive structure for the nation's savers as they consider where to put their money -- and it is an incentive structure likely to unnerve policy makers.

With a one-year deposit rate at 3.60 percent, placing money in the bank is a sure losing strategy at current inflation levels, while real estate and stocks lure with stellar profits -- but also higher risks at present valuations.

"Money keeps flowing into the property and stock markets," said Ma Qing, an economist with CEB Monitor Group, a financial research company based in Beijing.

"So the government is rather unlikely to loosen its measures just because industrial output is slowing," he said.

Analysts said after the inflation data was released that an interest rate hike, the fifth of the year, was not far away.

The government has struggled to cool the real estate market and prevent speculation, and may now go further by increasing the down payment repeat home buyers pay to 40 percent from now as low as 20 percent, media said Thursday.

In the first eight months of the year, industrial output increased 18.4 percent from the same period in 2006, the bureau said.

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