China's GDP up 9.5% in Q1

China's grew by an unexpectedly rapid 9.5 percent in the first three months of this year, the government said yesterday, warning that it needs to tighten controls on surging investment in new factories and real estate.

The increase exceeded the forecasts of analysts who had expected that efforts by Beijing over the past year to slow growth would have a bigger impact.

The government has cautioned repeatedly that surging growth could ignite inflation and harm China's fragile banks.

The economy also grew by 9.5 percent in the fourth quarter of last year. The government's official target for growth is 8 percent a year.

Leading first-quarter surge was a 22.8 percent jump in investment in factories, construction and other "fixed assets," to 1.1 trillion yuan (US$133 billion), the government said.

"Investment in fixed assets is still overheated," said Zheng Jingping, spokesman for the National Bureau of Statistics, at a news conference.

Zheng the government needs to tighten controls on land use and loans for new construction, warning that too much investment pushes up prices for raw materials such as crude oil and iron ore.

Speculation real estate also needs to be constrained, Zheng said. He said China should learn from developed countries which levy property taxes and transaction fees.

While growth was far slower than the 43 percent jump recorded in the first quarter of last year, it was still "at a very level," he said.

"The task of macroeconomic regulation and control is still arduous," he said.

Manufacturing consumer spending also registered double-digit growth. Industrial output was up 16.2 percent at 1.4 trillion yuan. Retail sales rose 13.7 percent to 1.5 trillion yuan.

Inflation moderate, with the consumer price index up 2.8 percent from the same period last year, the bureau said.

It said GDP for the quarter totalled to 3.1 trillion yuan.

Economists by Dow Jones Newswires had expected GDP growth to slow to 8.9 percent.

At the same time, the government will increase farm subsidies to close China's yawning urban-rural wage gap, Zheng said.

The disposable income of urban residents rose 8.6 percent to 2,938 yuan in the first quarter, while rural incomes grew 11.9 percent to 967 yuan, the bureau said.