China's economy grows 11.1%, faster than expected

BEIJING - China's economy picked up speed in the first quarter, growing 11.1 per cent compared with the same period a year earlier, the government said on Thursday.

The outcome for the first three months of the year, largely in line with analyst forecasts at around 11 per cent, is likely to have been boosted by a yawning trade surplus and massive investment in infrastructure.

Growth in the world's fourth-largest economy reached 10.7 per cent in full-year 2006 and ran at 10.4 per cent in the three months to December.

The government has set a growth target of 8.0 per cent for 2007 as a whole.

The three months to March posted the highest quarterly growth rate since the second quarter of last year, when the economy expanded 11.5 per cent, according to revised government data.

Concerns about economic growth
Announcing the figures, the National Bureau of Statistics noted a whole series of concerns about the pace of economic growth which continues to run ahead despite government efforts to put the country on a more sustainable path.

'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,' NBS spokesman Li Xiaochao said in a statement.

China's main measure of inflation, the consumer price index, rose 2.7 per cent in the first quarter of 2007 from a year earlier, the NBS said. CPI in March alone was up 3.3 per cent, suggesting a pick up in price pressures.

The government is targetting an inflation rate within three per cent this year in the fast growing economy.

Consumer inflation is one of the key measures that the central bank monitors when deciding what monetary measures to adopt.

Negative reaction
Prior to the data, stockmarkets in China and around the region had fallen sharply on concerns strong data combined with a pick up in inflation would see Beijing take more draconian measures to slow the economy.

Fixed asset investment rose 23.7 per cent in the first quarter.

Fixed asset investment, the main indicator of mostly state-funded spending on new productive capacity, is seen as being fuelled by the ample liquidity in the world's fourth-largest economy.

The government has undertaken several measures to tighten liquidity in the past several years as it tries to keep the economy on a more sustainable growth path.

Industrial output expanded 18.3 per cent in the first quarter. This indicator has been boosted by massive investment in new plant and equipment in recent years, alongside booming exports.

In the first three months of the year, China posted a trade surplus of US$46.4 billion (S$70.7 billion), about double the figure for the same period in 2006.

China has been eager to prove it is addressing concerns about its trade policies after the surplus last year soared 74 percent to hit a record 177.5 billion dollars. -- AFP