CHINA / National

China's economy roars 10.9% in first 6 months
Updated: 2006-07-18 11:00

China's brisk economy has continued its roaring trend, with its domestic gross product jumping by 10.9 per cent in the first six months this year, despite a string of government orchested attempts to rein in cheap credit and excessive investment.

NBS spokesman Zheng Jingping.

Thanks to an affluent supply of food and raw production materials, China achieved a lowered rate of inflation, with the consumer product index (CPI), a major gauge of the inflationary pressure, rising at only 1.3 per cent in the first half year.

With the inflationry pressure not on a mounting spiral, Chinese analysts said that it is still too early to predict an immediate interest rate hike by the country's central bank to tighten borrowing from the commercial banks.

Zheng Jingping, a spokesman from the National Bureau of Statistics, said Tuesday morning at a news conference sponsored by the State Council Information Office in Beijing, that China's GDP hit a total of US$1.15 trillion in the first half year, up 10.9 percent over the same period last year. It grew 11.3% in the second quarter.

China can sustain such "fast and stable growth" but must rein in a construction boom and rapid credit growth to prevent an outbreak of inflation, Zheng said.

He announced that fixed asset investment witnessed a lofty rise of 29.8 percent in the first six months, picking up speed from last year and further revealing the difficulties in reining in some heated industrial sectors like property, automobile, steel and cement.

Although many observers overseas caution China, the world's fastest growing major economy, may have entered a hectic phase of breakneck development, Zheng, the government spokesman, expressed confidence that China's economy will have a smooth sailing ahead.

"We believe the economic growth rate at the current stage is reasonable," Zheng said at a news conference.

He picked up three major economic indicators to support himself: lowered inflationary pressure which saw prices actually declining; improved situation in the previous "bottleneck" sectors like market supply of coal, electricity, oil and transport; and reinvigorated robust economic growth outside China.

Zheng said that China's rapid economic growth is reasonable and basically healthy, because the worldwide economy is booming. Major world economic organs have estimated the world's economy will rise 4.9% in 2006, growing 0.6% than a year ago.

Another factor that has contributed to China's fast growing economy is the domestic consumption. Zheng reported that retail sales reached US$456 billion dollars in the first six months of the year, increasing a remarkable 13.3 per cent over the same period last year.

Masahiro Kawai, head of the Asian Development Bank's Office of Regional Economic Integration, said China, the biggest engine in East Asia, needs to restrain its robust growth.

"A high growth rate is good for the rest of the Asian economies, but it's in the best interest of everybody to see China's sustained, stable growth rates, and the current growth rates are a bit higher than sustainable," he said.

"We have not quite seen the direct impact of monetary tightening so far ... the current monetary policy tightening appears to be insufficient," Kawai said, adding an April hike in interest rates has not tamed loan growth.

Analysts said the economy had built up such a head of steam that, barring a dramatic policy tightening that would be out of character for China's cautious planners, growth was unlikely to slow much in the rest of the year.

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