CHINA:CHINA IS likely to persevere with tightening policies aimed at tackling surging inflation after the Chinese economy grew a robust 9.5 per cent in the second quarter from a year earlier, a mild slowdown from its first quarter pace.
Data released yesterday showed Chinese growth holding up well, defying those who feared government tightening measures could trigger a “hard landing” for the world’s second-largest economy. After inflation hit a three-year high of 6.4 per cent in June, China’s central bank raised interest rates last week for the fifth time since October and has also raised the portion of deposits that banks must hold in reserve nine times over the same period.
“Controlling inflation remains the top policy priority in the short term, and we continue to expect monetary policy to remain tight in the next few months,” said Peng Wensheng, an economist with CICC, the Chinese investment bank.
With Beijing trying since last year to limit bank lending, cool the scorching real estate market and slow rapid price increases, most economists had expected significantly lower GDP growth in the second quarter than the 9.7 per cent year-on-year increase in the first three months. The stronger second-quarter growth than expected, at 9.5 per cent, was boosted by growth in industrial production of 15.1 per cent from a year earlier in June, up from 13.3 per cent growth in May and the fastest pace in almost a year.
Resilience in underlying growth will give policymakers room if they need to implement measures to tackle stubborn inflation.
Officials struck a confident note as they revealed the latest economic figures.
“There is only a very small chance that China’s economy will witness a drastic and rapid decline,” said Sheng Laiyun, spokesman for the National Bureau of Statistics yesterday.
He said the mild slowdown in the second quarter was expected and desirable and the economy was “just like a person who can’t always run at an accelerated speed – he has to slow down in order to run well over the long term”.
However, the figures showed China’s growth remained unbalanced and Beijing was making little headway in its efforts to shift from over-reliance on investment towards a more consumption-driven model.
