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Rediff.com  » Business » China grew by 9.7% in Jan-March; inflation at its peak

China grew by 9.7% in Jan-March; inflation at its peak

Source: PTI
April 15, 2011 16:11 IST
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China grew by 9.7 per cent in the first quarter of this calendar year while inflation sped to its 32-month high of 5.4 per cent, according to the data released by National Bureau of Statistics (NBS).

China has set its GDP target for 2011 at 8 percent. The national economy has a good beginning given the steady and relatively fast growth," Sheng Laiyun, spokesman of the NBS said.

However, the growth is a notch slower than December quarter of 2010, when the economy grew by 9.8 percent.

"The pace eased slightly in the first quarter but will pick up in autumn. The figure shows the tightening measures are taking effect," Zhu Jianfang, chief economist with CITIC Securities told official Xinhua news agency.

Consumer prices rose 5.4 percent in March from a year ago, a 32-month high, said the NBS.

The country aims to hold inflation at around 4 per cent for the full year. To mop up the excessive liquidity that can stimulate inflation, China's central bank has raised the reserve requirement ratio for commercial banks nine times since the beginning of last year.

On April 5, the central bank announced the second interest rate hike this year.

"Emerging markets will continue to face inflationary pressures if developed economies do not halt their quantitative easing policies. Monetary polices have limited effects in curbing consumer prices, but they are necessary in managing inflation expectations and preventing hyper-inflation," said Guo Tianyong, a professor with the Central University of Finance and Economics.

Retail sales rose 16.3 percent year on year in the first quarter, compared with 15.8 percent during the first two months.

China's Cabinet, has pledged to continue the country's prudent monetary policy to rein in soaring prices.

"Judging from the inflation situation in the first quarter, we are still under great pressure of price hikes," Premier Wen Jiabao said at an executive meeting of the Cabinet on Wednesday, adding, "We should never lower our guard."

Consumer spending, regarded as one of the three engines driving China's economic growth, contributed 5.9 percentage points in the 9.7-percent GDP growth for the first quarter, according to the NBS.

It contributed to about 37 percent of China's 39.8 trillion yuan of GDP last year. Sun Chi, an analyst with the Nomura Securities, said inflation pressure would persist for a period of time, which indicated the monetary tightening circle was only in its early days.

"We expect interest rates will be lifted by another 75 basis points this year, and bank's reserve requirement ratio will be increased by another 100 basis points," he said.

 

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