"The trendy multimedia handset will have a great appeal to fashion-sensitive young users, and will spark more interest to the TD standard," said Wang Jianzhou, President of China Mobile, in a statement.

Manufacturing Holds Up

If there are any Chinese sectors that can lead the way out of the downturn, manufacturing is one of them.

The purchasing manager index (PMI), a barometer of manufacturing confidence, stood at 54 percent in August, up 0.7 percentage points from July, according to the China Federation of Logistics and Purchasing. A reading of above 50 percent suggests expansion, while one below 50 indicates contraction.

Analysts believe that Chinese manufacturers are taking heat from a recovery in the world's third largest economy. The upward trend is likely to continue into the next few months as a resurgence of activities in real estate and auto-making feed into a number of upstream sectors, they said.

"As the August PMI indicated, China's manufacturing sector will continue to gather momentum, firming up foundations for the broader economic turnaround," said Zhang Liqun, a researcher with the State Council's Development Research Center, in an interview with Xinhua News Agency.

However, the government should closely watch the PMI's development, given the looming uncertainties that hang over the economy, he said.

Inflation or Deflation?

In China's fight against deflation, there is always the danger that things could swing too far the other way. Commercial banks direct a flood of low-interest credit into the economy, leaving worries that the liquidity explosion will prop up prices to such an extent that it creates runaway inflation. Whether or not that happens, there is good reason to put up a defense.

Pork, a trigger of inflation that peaked in 2007, is sounding an alarm. The price of pork, as well as eggs, in a number of cities has been rapidly rising for nine straight weeks, stoking fears over a comeback of inflation.

But the National Development and Reform Commission (NDRC) clamped down on the concerns, citing the price hikes as a normal market adjustment during the peak season. Besides this, government purchases for national reserves also pushed up prices, said the NDRC.

Analysts say it is less likely for the consumer price index, in negative territory since February, to turn around in the short term. A recent estimate by the Ministry of Commerce put the inflation rate this year at 2 percent, far below the 5.9 percent seen in 2008.

Zhou Zhitai, a senior economist at the Ministry of Housing and Urban-Rural Development, believes a potential threat is the prolonged rally in international crude oil prices that may force inflationary pressures into China as it did in 2007.

Zhou suggested the government increase pork and grain supplies and rebalance the monetary stimulus in line with economic realities to fend off liquidity redundancy.

Topping out?

Housing prices are skyrocketing in China as investors jump off the sidelines and rush to buy. Meanwhile, developers are scrambling to pay peak-level prices for land to lock up future profits. Local governments that expect to earn revenues from land sales are encouraging the trend. The housing boom helped the sluggish economy find a way out of the gloom, but also raised concerns that another bubble could be in the making. This echoes what happened in late 2007 when real estate euphoria gave way to a sharp correction that sent prices plunging.

Some worrying signs have been surfacing. According to data from the Shanghai-based Centaline (China) Property Consultants Ltd., sales of new commercial residences in Beijing and Shanghai fell slightly in August month on month, though prices continued to climb. This signals a slackening of the market to hold up the frothy prices, said a report by Centaline. Supply increases and regulatory tightening on mortgages will also pour cold water on the buying craze, it added.

It is necessary now for banks to keep a handle on housing mortgages to cool the white-hot market, and also accelerate affordable housing projects that benefit low-income groups, said Guo Tianyong, a senior economist with the Central University of Finance and Economics. It will be an effective vehicle to restore the health of the market, he said.