* Officials confident of hitting 8 pct growth target
* Nov retail sales growth slows but beats forecast
* Fiscal stimulus seen buffering rapid consumption decline
* Official sees recovery starting after weak Q1
* Minister says industrial output growth fell further in Nov
By Simon Rabinovitch and Zhou Xin
BEIJING, Dec 12 (Reuters) - Senior officials voiced confidence on Friday that China can hit its all-important target of 8 percent growth in 2009 even though the economy is suffering its deepest slump in a decade.
In a piece of good news for policy makers after shockingly weak export, import and factory production figures lately, the National Bureau of Statistics reported that retail sales held up better than expected last month.
Sales growth slowed to 20.8 percent in the year to November from October's reading of 22.0 percent, beating forecasts of a 20.5 percent rise.
Economists Ting Lu and T.J. Bond at Merrill Lynch in Hong Kong said cooling industrial output was more concentrated on capital goods, which do not show up in the retail sales data.
"Stiff headwinds are undoubtedly ahead and we expect a further slowdown in coming months, but fiscal expansion will likely buffer a rapid fall in retail sales in general and consumption in particular," they said in a note to clients.
The government launched a 4 trillion yuan ($586 billion) stimulus plan on Nov. 9 and followed up on Wednesday with a pledge after a strategy meeting to ramp up public spending and cut taxes to promote domestic demand.
Liu He, deputy director of the central leading group for financial and economic affairs, said he expected the economy to start recovering after a weak first quarter and grow by at least 8 percent next year.
"I believe, with the correct policies from the central government, the Chinese economy should not and will not have major problems next year," Liu told a financial forum.
Jin Liqun, a top official at China Investment Corp, the country's sovereign wealth fund, said a rate of 9 percent was even possible thanks to "timely and effective" policies rolled out by the government.
DON'T PANIC
Their comments feed into a campaign Beijing is waging dubbed "protect eight" -- shorthand for achieving the 8 percent growth deemed necessary to create enough jobs for the millions of people joining the workforce each year.
Not since 1998 and 1999, in the aftermath of the Asian financial crisis, has China reported sub-8 percent growth. This year will be the first time in six years that the pace of expansion has fallen to single digits.
Officials are twinning the messages of confidence with unusually frank acknowledgements that the economic downturn will cause unemployment to soar, putting social stability at risk.
Export firms employ tens of millions of rural migrants. With factories closing by the thousands in southern China, many of these workers are heading home much earlier than usual for the Lunar New Year, which falls in late January.
Liu said many Chinese companies had been too optimistic and so had built up excessive inventories of finished goods and raw materials that were now being worked off.
"It is inevitable for such an adjustment to happen, and the slowdown may look severe, but don't panic about this," Liu said.
Li Yizhong, minister of industry and information technology, disclosed that annual industrial output growth fell further in November from October's 8.2 percent pace. Production had not bottomed out yet and would take a further hit in December.
"Some companies have stopped or cut production. Some have gone bankrupt or been bought out. There have been some layoffs, pay cuts and migrant workers returning to the countryside," he told a news conference.
TESTING TIMES
To help the steel industry, where production and prices have been in freefall, Li said Beijing was considering raising export tax rebates and buying some steel products for its reserves.
And to shore up the auto industry, whose sales fell 15 percent in November from a year earlier, he recommended that Beijing cut sales taxes for low-emission cars.
"Not only is it a way of confronting current economic difficulties and encouraging growth, I believe more importantly that structural adjustments now can alter our model of economic growth and position us well for the next phase in the economic cycle," Li said.
Economists agree that the crisis presents China an opportunity to rebalance its economy away from exports and related investments and to promote household consumption instead.
But they said that pulling off such a transition would take a long time; in the interim, the economy could be vulnerable.
The World Bank is forecasting 7.5 percent growth next year; Goldman Sachs expects a rate of just 6.0 percent, which would be half last year's breakneck 11.9 percent.
"It's going to be a test for policy makers in Beijing whether they can engineer a soft landing, and the consumer response will be an important part of that," said David Cohen with Action Economics in Singapore. (Additional reporting by Langi Chiang and Jason Subler; Writing by Alan Wheatley; Editing by Ken Wills)