China's GDP growth slows down

Stephen McDonell, China correspondent

Last Updated: Thu, 15 Jul 2010 16:19:00 +1000

China's economy has slowed in the second quarter of 2010, as the government moved to normalise its monetary policy.

Annual gross domestic product growth was at 10.3 per cent for the second quarter, down from from 11.9 in the first quarter - giving it an 11.1 per cent growth for the first six months of the year.

China's National Bureau of Statistics says gross domestic product increased by 11-point-1 per cent in the first six months of this year, compared to the same time last year.

The Chinese Government's figures also show retail sales were up more than 18 per cent, urban property investments were up almost 26 per cent and industrial output rose by just under 18 per cent.

Chinese Premier Wen Jiabao says the economy is going in the expected direction, after government moves to slow the economy in the wake of a record credit surge to combat the global economic crisis.

The latest figures add to concerns that the Chinese economy is losing steam, although Beijing has so far shown no intention of reversing tightening policies.

"Generally speaking, the economy is running well," said Sheng Laiyun spokesman for the National Bureau of Statistics.

"But there are still a lot of difficulties and problems in the course of economic recovery."

However, Mr Sheng says growth remains strong in many areas.

"A 10.3% growth in Q2 is still a very high figure. For example power generation rose 6.2% quarter on quarter between Q2 and Q1 and steel production rose 12.8%," he said.

The nation's closely watched consumer price index, which is widely used to gauge inflation, rose 2.9 percent on year in June alone, compared with 3.1 percent in the previous month.

The slowdown in inflation added to mounting evidence that the government's measures to avert economic overheating were kicking in.

The head of economics at Australia's Macquarie Group says the latest growth figures from China prove that fears in financial markets about a dramatic Chinese slow-down have been overstated.

But Richard Gibbs, from Macquarie Group, says the figures are nothing to be concerned about.

"I'd suggest that it doesn't show the Chinese economy dropping off the cliff, if you like, which was a concern in financial markets of course with the crackdown in the property sector. We do notice some weakness in the CPI which is probably welcome of course in terms of a reduction in inflationary pressures, but that was largely because of food prices."

The head of economics at Australia's Macquarie Group says the latest growth figures from China prove that fears in financial markets about a dramatic Chinese slow-down have been overstated.

But Richard Gibbs, from Macquarie Group, says the figures are nothing to be concerned about.

"I'd suggest that it doesn't show the Chinese economy dropping off the cliff, if you like, which was a concern in financial markets of course with the crackdown in the property sector. We do notice some weakness in the CPI which is probably welcome of course in terms of a reduction in inflationary pressures, but that was largely because of food prices."

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