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China's growth rate falls for fourth quarter
By Wang Xu (China Daily)
Updated: 2008-07-18 08:45

China's economic growth has slowed down for the fourth straight quarter but inflationary pressure remains high, the National Bureau of Statistics said Thursday.

The gross domestic product (GDP) growth in this year's second quarter was 10.1 percent year-on-year, against 10.6 percent in the first. The consumer price index (CPI), a major gauge of inflation, fell to 7.1 percent in June, compared to 7.7 percent in May.

The inflationary pressure has eased a bit in recent months but is still a worry, analysts said, and this could prompt the government to continue its macro-control policy.

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"The CPI growth is in line with the macro-control policy," said Li Xiaochao, a spokesman for the NBS. "We will continue to check price rise in the second half of the year to control inflation."

China's economic growth hit a record 11.9 percent in last year's second quarter, raising more concern over a runaway economy. But government measures have reined in the growth since.

The weakening world economy has contributed to the slowing down of the growth, too, by causing exports from China to fall. The country's export growth fell to 21.9 percent in the first half from 27.6 percent in the same period last year.

Because of worries over a further weakening of the US economy, the government might consider easing the macro-control policy to help the export sector, whose growth has slowed because of the rising yuan and higher labor costs, analysts said earlier.

But "the growth momentum is still strong despite natural disasters, credit tightening and weaker external demand," said Sun Mingchun, an economist with Lehman Brothers, referring to the rebound in fixed-asset investment growth.

In the first half, China's investment in fixed assets such as roads and factories reached 26.3 percent, up 0.4 percentage point year-on-year.

And analysts said the momentum is likely to continue in the second half when the country is expected to spend heavily on reconstruction in the areas hit by the earthquake, snowstorms and floods.

"Since the economic growth rate is still above 10 percent, it is too early for an explicit relaxation of policy controls," Huang Yiping, an economist with Citigroup, said.

The GDP growth has moderated in recent months but it is still strong because it is higher than the 9.8 percent average of the past 30 years, Li Xiaochao said.

Asked about the macro-control policy's target growth rate, Li said: "A simple way of calculating the proper economic growth rate is referring to the average of a long period."

The producer price index (PPI), which measures factory-gate inflation, reached 8.8 percent in June, the fastest rise since 1999.

Since it usually takes six months for manufacturers to pass on their cost pressure to the end consumers, the PPI gain looks like an ominous sign for the fight against inflation.

"Fuel prices have to be raised," said Lian Ping, an economist with the Bank of Communications, because "the effects of an increase in refined oil prices could be greater in July."

The government raised fuel prices by as much as 18 percent last month amid skyrocketing crude prices. But petroleum products, like many other public utilities, are still under-priced because of the government's efforts to curb inflation.