By John Ruwitch and Jason Subler

PATTAYA, Thailand/BEIJING (Reuters) - China's economy is in a better shape than expected with March industrial output growth exceeding forecasts, but it still faces big challenges, Premier Wen Jiabao said on Saturday.

Wen, speaking on the day when the central bank reported a record rise in new lending last month, said industrial output growth picked up to 8.3 percent in March from a record low of 3.8 percent in the first two months of the year.

Analysts polled by Reuters had expected a 6 percent rise in industrial production, due for official release on April 16 along with first quarter economic growth figures and other data.

"China's economy has shown some positive signs, but we can all see that our economy still faces some very big difficulties," Wen told reporters in the Thai seaside resort of Pattaya, where East Asian leaders were holding a summit.

He said China's policymakers have taken appropriate action to help the world's third largest economy to weather what has turned into the worst global crisis since the 1930s Great Depression.

"Chinese government policy has been timely, correct and decisive," Wen said.

In the latest sign that the government's efforts to revive the economy were beginning to bear fruit, new loans and money supply growth surged to record highs in March.

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