Economic growth eases amid tightening

Updated: 2011-07-13 15:15


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China's rapid economic growth slowed in the latest quarter to a still robust 9.5 percent, easing fears of an abrupt slowdown and giving Beijing room to tighten controls to fight surging inflation.

Related: Forex hike suggests influx of 'hot money'

Economic growth slowed slightly from 9.7 percent in the January-March quarter following repeated interest rate hikes and other controls, data showed Wednesday. Factory output rebounded and retail sales grew by double digits.

While the United States and Europe try to shore up sluggish growth, Beijing wants to steer its impressive expansion to a more manageable level and cool inflation that soared to a three-year high of 6.4 percent in June.

"The strength of the economy will make them confident and well prepared to impose more tightening measures if needed," said Frances Cheung, a senior strategist for Credit Agricole CIB in Hong Kong.

Many analysts had expected second-quarter growth of 9.3 percent to 9.5 percent. Asian stock markets, which have wilted in recent days amid Europe's worsening debt crisis, got a boost from the Chinese economy's resilience.

Analysts expect inflation to ease later in the year but June's unexpectedly sharp price rises, driven by a 14.4 percent jump in food costs.

June's food price increase was driven by a 57.1 percent jump in the price of pork, the country's staple meat.

Analysts blame the inflation spike on the dual pressures of consumer demand that is outstripping food supplies and a bank lending boom.

Beijing's anti-inflation measures have prompted concern they might trigger an abrupt slowdown but most analysts say China can avoid that.

"Any slowdown is likely to be fairly gradual and China can manage a soft landing rather than a hard landing," said Credit Agricole CIB's Cheng.

Factory output rose 15.1 percent in June over a year earlier, the National Bureau of Statistics reported.

Growth in retail sales accelerated to 17.7 percent, up from the first quarter's 16.3 percent. That could be a positive sign for Beijing's efforts to boost domestic consumption and reduce reliance on exports and investment to drive growth.

Spending on factories, real estate and other fixed assets declined by 1.04 percent compared with May.

"Our forceful measures are showing results," said a statistics bureau spokesman, Sheng Laiyun, at a news conference.

The World Bank is forecasting China's economic growth this year at 9.3 percent after raising its outlook earlier this year from 8.5 percent.

"The biggest challenge for the second half is how to strike a balance between steady and fast growth, inflation expectations and economic readjustment," said Sheng, the government spokesman. 


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