labels: economy - general
China''s GDP growth hits 11-1/2-year high of 11.9 per cent in Q2 ''07news
19 July 2007

Mumbai: China, the world''s fourth largest economy, grew at a scorching 11.9 per cent – a 11-1/2-year high – in the second quarter of the current year, confirming analysts'' fears of a further policy tightening to cool the world''s fastest-growing economy.

China, now well on course for a fifth straight year of double-digit growth, is expected to overtake Germany as the world''s third-biggest economy the end of the current year.

The 11.9 per cent growth that followed a first quarter gross domestic product growth of 11.1 per cent, also exceeded expectations of a 10.8 per cent rise in the second quarter, according to China''s National Bureau of Statistics.

"We will continue with moderate tightening to control the monetary and credit situation," Li Xiaochao, a spokesman of the agency, said.

China reported a moderate rise in consumer price inflation, which hit a 33-month high of 4.4 per cent in June, up from 3.4 per cent in May, amidst soaring prices of pork and grain.

Industrial production in June rose 19.4 per cent from the same period a year earlier while urban investments grew 28.5 per cent. The yuan also edged up to 7.5632 per dollar from 7.5661 at the close of trading on June 18.

The central bank is expected to intervene by further raising interest rates and banks'' required cash reserves. It could also suck cash out of the banking system by selling bonds and imposing lending curbs on banks.

Alternatively, the state may withhold approval for new investment projects and increase taxes to deter energy-intensive exports, analysts say.

China could also let the yuan appreciate faster to cap the rising export surplus or give incentives to savings by removing or reducing tax on interest rates.

After overtaking Britain in 2005 to become the fourth-largest economy, China is now breathing down Germany''s neck. China''s GDP was $2.7 trillion in 2006, just below Germany''s $2.9 trillion, according to World Bank figures.

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China''s GDP growth hits 11-1/2-year high of 11.9 per cent in Q2 ''07