China’s economy in the first quarter grew 11.1 percent from the corresponding period last year, fuelled by rapid investment and booming exports. At the same time, a series of recent monetary tightening measures taken recently seem to have apparently little impact to restrain the activity. However, Chinese inflation rate shot up to its highest level in more than two years, triggering speculation that authorities will take further measures to cool the economy.
The National Bureau of Statistics said in a news conference that the consumer price index in March rose 3.3 percent while fixed-asset investment countrywide grew a vigorous 23.7 percent. Speaking over the growth rate, bureau spokesman Li Xiaochao told a news conference, ‘If this type of fast growth continues, there is the possibility of shifting from fast growth to overheating. There is that risk’.
The fast economic growth and investment upsurge surpassed expectations for the world’s fourth-biggest economy and come regardless of a series of policy tightening moves by the government to restraint growth that last year came to 10.7 percent. The first quarter growth rate was up from 10.4 percent in the last quarter of 2006, but slightly down from the 11.5 percent in the second quarter of last year, the fastest rate in a decade.
While announcing the figures, the NBS noted a whole series of apprehensions about the pace of economic growth which continues to run ahead despite government efforts to put the country on a more sustainable path. Li Xiaochao said in a statement, ‘Outstanding problems existing in economic development are an imbalanced balance of payments, excessive liquidity, an irrational economic structure and high pressure on energy conservation and pollutant emissions reduction’.
Although the government has undertaken quite a few measures to tighten liquidity in the past several years but until now it has very negligible impact on the pace of the economy. In the meanwhile, Industrial output increased by 18.3 percent in the first quarter encouraged by huge investment in new plant and equipment in recent years, alongside thriving exports.
Chinese shares tumbled on Thursday on uncertainties that Beijing could raise interest rates to cool China’s fast-growing economy.
