China growth sizzles, inflation bubbles

BEIJING (Reuters) – China’s turbo-charged growth eased just a touch in the first quarter, while its inflation jumped to a 32-month high, putting pressure on the government to do more to rein in prices and keep the economy on an even keel.

China’s gross domestic product increased by 9.7 percent in the first quarter from a year earlier, down from 9.8 percent in the final three months of 2010 but ahead of an expected 9.5 percent pace.

Consumer price inflation sped to 5.4 percent in the year to March, the fastest since July 2008 and topping market forecasts for a 5.2 percent increase.

Taken together, the data published by the National Bureau of Statistics on Friday showed that the world’s second-largest economy was still sizzling, little hindered by the central bank’s half-year tightening campaign that many investors had feared would undermine growth.

“The figures show that inflation pressure will not taper off in the short term and we expect the consumer inflation to remain high in the second quarter,” said Sun Miaoling, economist with CICC, the largest Chinese investment bank.

“The government will keep battling inflation as its priority in coming months, which could prompt the central bank to further tighten its monetary policies,” she added.

The People’s Bank of China has increased benchmark interest rates four times since last October and has required the country’s big banks to lock up a record high of 20.0 percent of their deposits as reserves.  Read more:

Categories: China, Economics

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