China's economy marches on as growth rate soars by nearly 12%
By Mail Foreign Service
Last updated at 11:07 AM on 15th April 2010
Chinese annual growth has soared to its fastest pace for three years, official figures showed today.
The world's third-biggest economy grew 11.9 per cent in the first quarter, beating forecasts as its strongest performance since 2007.
The year-on-year growth has fuelled calls for tighter policies to prevent the Chinese economy from overheating as Beijing considers a real estate tax to cool down its rampant property market.
Economists have urged China to raise interest rates to curb potential inflation problems and to revalue the yuan.
Glenn Maguire, from Societe Generale in Hong Kong, said: 'Yuan stability and China's stimulus package made an enormous contribution to global stability in the aftermath of the crisis, but now that China's economy is growing by 12 per cent, it's time for China to share some of that growth with the rest of the world via appreciating its exchange rate.'
Mark Williams, with Capital Economics in London, said low price pressures in China meant there was no economic reason for Beijing to let the yuan rise after maintaining it at around 6.83 to the dollar for the least 21 months.
Property prices have leapt 11.7 per cent in the year to March, while the consumer prices index rose just 2.4 per cent.
Mr Williams said: 'Economic rebalancing would in the long run be better served by having a stronger currency.'
Unlike its neighbours in Asia, including India and Malaysia, China has kept it benchmark interest rates unchanged, even though it is leading the global recovery charge.
Tom Orlik, of Stone & McCarthy Research in Beijing, said: 'The government is faced with an unpalatable choice: raise rates and dampen the ardour of investors in the real estate sector, or leave rates on hold and allow the property bubble to expand further, and risk inflationary expectations taking hold.'
China's central bank has relied on curbing credit growth to keep the economy on an even keel.
This year's quota on new bank lending has been cut to 7.5 trillion yuan from a record 9.6 trillion yuan in 2009.
The State Council, China's cabinet, promised yesterday after a preview of data to stick to the 'appropriately loose' monetary stance and active fiscal policy first adopted at the height of the global financial crisis in late 2008.
J.P. Morgan, CLSA and Citi were among banks to raise their growth forecasts for 2010, a year in which China is expected to overtake Japan to become the second biggest world economy.
Retail sales in the country also rose 18 per cent, factory output grew 18.1 per cent and urban investment in fixed assets like roads and factories soared 26.4 per cent in the first quarter.
Li Xiaochao, a statistics office spokesman, said: 'This year, the economy's momentum has increased. We are off to a good start.'
