China's economic growth slows in second quarter

China said Thursday its economic growth slowed in the second quarter, as massive stimulus spending was scaled back and moves to rein in soaring property prices started to bite.

Gross domestic product in the world's third-largest economy maintained double-digit growth for the third quarter in a row, expanding 10.3 percent in the three months to June, according to the National Bureau of Statistics.

The latest figures add to mounting evidence that the Chinese economy is losing steam, although Beijing has so far shown no intention of reversing tightening policies, and analysts downplayed the risk of a sharp slowdown.

"Generally speaking, the economy is running well," NBS spokesman Sheng Laiyun told reporters.

Sheng said the moderate slowdown in growth in the second quarter would "help prevent the economy... from overheating," but added: "There are still a lot of difficulties and problems in the course of economic recovery."

The second quarter figure marked a slowdown from the blistering 11.9 percent growth in January-March and the 10.7 percent in the last three months of 2009, after Beijing introduced a range of measures to cool the red-hot economy.

The economy grew 11.1 percent in the first half of 2010 compared with the same period a year earlier, the data showed.

Analysts said economic growth was expected to slip to single digits in the second half, but dismissed the idea of any serious troubles in the short term.

"Despite the slowing growth, we think the chance for double-dip in China is quite small as China?s pragmatic policymakers are quite flexible on policy stance," said Lu Ting, an economist at Bank of America-Merrill Lynch.

"They still have a deep pocket to buffer any big slowdown."

The closely watched consumer price index, the main gauge of inflation, rose 2.9 percent on-year in June alone, compared with 3.1 percent in the previous month, the statistics bureau said.

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

Inflation was up 2.6 percent in the first half of 2010 from a year earlier.

Morgan Stanley economist Wang Qing said there was a "high probability" the government would increase its 7.5 trillion yuan (1.1 trillion dollars) bank lending target for this year as inflation continues to ease.

"In light of receding inflationary pressures, the policy stance in the second half will likely demonstrate an easing bias," said Wang.

China's fixed asset investment in urban areas, a measure of government spending on infrastructure and a key driver of the economy, rose 25.5 percent in the first half from the same period last year, the government said.

Industrial output from the country's millions of factories and workshops increased 17.6 percent on year in the six-month period.

Retail sales, a key measure of consumer spending, rose 18.2 percent in the first half of 2010 from a year ago.

Recent data also showed bank lending, real estate prices and imports all slowed in June from the previous month, while surveys of purchasing managers at factories across China showed manufacturing activity eased last month.

Beijing has shown no intention of altering its policy tightening stance despite signs the economy is running out of puff, and has begun to rein in the huge stimulus spending put in place in the wake of the global financial crisis.

Chinese workers perch on scaffolding at a construction site in Hefei, central China's Anhui province.

In recent weeks, China also has loosened its grip on the yuan exchange rate by allowing the currency to trade more freely against the dollar, while export tax rebates on some products have been removed.

"It's more of a wait-and-see attitude from Beijing's leaders," said Ken Peng, a Beijing-based economist for Citigroup.

Chinese Premier Wen Jiabao said last month he believed the economy was moving in the "expected direction", which was interpreted as a sign that the government planned to stick to current policies.

Wen's comments came after President Hu Jintao, in a speech to the Group of 20 summit in Canada, called for caution in exit strategies from economic stimulus programmes to safeguard the global recovery.


Other news