Hold the Champagne on China’s Economy

China’s short-term economic prospects no longer look quite so foreboding, but it would be unwise to proclaim that a bottom has arrived. The country is in a long-drawn slowdown that didn't begin yesterday and won't be over next week. Far from its shores, the challenges to a recovery have registered among policymaking elites: When it nudged interest rates higher, the European Central Bank simultaneously warned of a slowing regional and global economy. China was present in all but name.

First, the encouraging news. After months of downbeat reports, optimists finally have something to chew on. Industrial production picked up nicely in August, exceeding forecasts, while the consumer has yet to throw in the towel, with retail sales notching a healthy increase. Unemployment in urban areas retreated a touch. Just as importantly, consumer prices crept back into positive territory in August. The prior month's numbers showed prices declined, the trigger for revved-up anxiety about the faltering recovery and lectures about the perils of deflation. This is consistent with the fluctuating pattern of growth that the Communist Party's politburo flagged in July.