China's Economy Surges 11.1% In 1st Quarter

Thursday, April 19th 2007, 7:40 am

By: News On 6

BEIJING (AP) _ China's sizzling economy surged 11.1 percent in the first quarter and inflation rose to its highest level in more than two years, raising prospects authorities will take further measures to cool growth and sparking sell-offs in regional markets.

``If this type of fast growth continues, there is the possibility of shifting from fast growth to overheating. There is that risk,'' Li Xiaochao, spokesman for the National Bureau of Statistics, told a news conference.

The consumer price index in March rose 3.3 percent, the bureau said, above the government's 3 percent target. Fixed-asset investment countrywide grew a robust 23.7 percent during March.

Asian stock markets fell ahead of the release in anticipation that the figures would be stronger than expected and prompt Beijing to raise interest rates or take other measures to slow growth in China, a major regional trading partner. The nervousness was increased because Beijing also delayed the release of the figures by five hours without an explanation.

Shanghai's benchmark index _ which had set new records for most of the last two weeks _ tumbled 4.5 percent, while stocks in Japan fell 1.7 percent and those in Hong Kong dropped 2.3 percent. European markets also opened lower.

China's economy, the world's fourth-largest, keeps growing rapidly despite despite a series of policy tightening measures by the government to rein in growth that last year came to 10.7 percent.

While China's leaders want rapid growth to reduce poverty, they also are trying to rein in an investment boom in real estate and other industries where they worry that overspending on unneeded factories and other assets could ignite inflation or a debt crisis.

Concerns about inflation are likely to grow after the CPI rose to its highest since hitting 3.9 percent in February 2005.

Inflation in the first quarter was 2.7 percent, up 1.5 percentage points compared with the same period last year. China has said it wants to keep inflation under 3 percent for the whole year after it increased 1.5 percent in 2006.

Beijing has already raised interest rates three times in the past year and imposed investment curbs on real estate, the auto industry and other fields. But authorities say local leaders are defying controls and some are initiating their own investment projects.

First-quarter gross domestic product was forecast to rise 10.3 percent from the same period a year ago, according to a poll of economists by Dow Jones Newswires. It was the highest rate of growth since the second quarter of last year, when growth reached 11.5 percent, the fastest rate in a decade.

Li said first-quarter investment in real estate development was up 26.9 percent over the same period last year.

The news on China's growth comes amid increased trade tension between Beijing and Washington, with the U.S. threatening to impose punitive tariffs on Chinese goods if it doesn't end currency controls blamed for the surpluses.

Last year, the United States reported a record $232.5 billion trade deficit with China.

U.S. critics contend China's currency, the yuan, is kept undervalued, giving its exporters an unfair price advantage and adding to its trade surpluses. Beijing has let the yuan rise 4.6 percent against the dollar since a revaluation in July 2005, but Washington wants faster action.

Beijing says it is trying to close the gap by cutting export rebates and taking other steps.

The statistics bureau said urban disposable incomes climbed 19.5 percent in the first quarter, while rural incomes went up 15.2 percent, the biggest increase in a decade.

The state-run Xinhua News Agency announced last week that China's foreign reserves, already the world's largest, had climbed past $1.2 trillion, and Li said first-quarter growth in the value of exports was up 27.8 percent, compared with an increase of 18.2 percent in the value of imports.