SHANGHAI'S industrial production weakened sharply in October under the grip of tight credit, highlighting need for a policy adjustment.

Industrial output in Shanghai edged up 0.9 percent from a year earlier to 261.1 billion yuan (US$41.3 billion) last month, a big drop from the pace of 4.7 percent in September and 7 percent in August, the Shanghai Statistics Bureau said today.

The moderation was a result of the tight monetary policies, a cooling economy and the city's efforts to upgrade its manufacturing structure, said Wang Zehua, an analyst at the bureau.

"Small firms, which account for more than two-thirds of Shanghai's economic output, are under great pressure to survive under the current credit conditions," Wang said.

The outlook is even gloomier when the city's Purchasing Managers Index, a harbinger of future industrial performance, fell 0.7 points from a month earlier to 47.7 in October, the lowest since July 2009. A reading below 50 indicates contracting manufacturing activities and October was the third consecutive month for Shanghai's PMI to fall below 50.

The six key industries in Shanghai, namely, information technology, vehicles, oil refinery, fine steel, machinery equipment and biomedicine, reported output gains of 2 percent to 175.6 billion yuan in October, better than the city's average pace. Wang said this demonstrated some achievement in Shanghai's efforts to upgrade its industries.