Thu, Jul 14, 2011 - Page 10 News List

China’s economic growth eases to 9.5%

SOFT LANDING:By avoiding an abrupt slowdown in economic growth, the government has more time to address inflation, which Beijing fears could fuel unrest


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.

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

While the US and Europe try to shore up sluggish growth, Beijing wants to steer its breakneck expansion to a more manageable level and cool inflation that soared to a three-year high of 6.4 percent last month.

“The strength of the economy will make them confident and well prepared to impose more tightening measures if needed,” said Frances Cheung (張淑嫻), 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.

Hong Kong’s Hang Seng index yesterday added 1.1 percent to 21,905.60, the Shanghai Composite index rose 1.5 percent to 2,794.27, and South Korea’s KOSPI gained 0.9 percent to 2,129.64.

Japan’s Nikkei 225 stock average finished up 0.4 percent at 9,963.14, Australia’s S&P/ASX 200 rose 0.4 percent to 4,514.80, while New Zealand’s benchmark slipped 0.2 percent to 3,424.35.

The slowdown in the world’s second-largest economy could have global repercussions if it cuts into demand for iron ore, factory machinery and other imports. Data released earlier showed China’s import growth fell sharply last month.

The slowdown will enable Beijing to address inflation, which can erode the public’s economic gains and fuel unrest.

Analysts expect inflation to ease later in the year, but last month’s unexpectedly sharp price rises, driven by a 14.4 percent jump in food costs, prompted suggestions Beijing might hike rates again or tighten other controls.

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,” Cheung said.

Factory output rose 15.1 percent last month over a year earlier, China’s 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 (盛來運), 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,” Sheng said.

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