Driven by stimulus spending,Chinas economy surges 11.9 pc in Q1

Chinas gross domestic product jumped 11.9 per cent in the first quarter of this year over the same period in 2009,the government said on Thursday...

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Chinas gross domestic product jumped 11.9 per cent in the first quarter of this year over the same period in 2009,the government said on Thursday,pointing to an accelerating recovery from the global economic crisis. That growth rate,the highest in three years,not only topped most economists forecasts,but handily beat the 10.7 per cent expansion that had been recorded in the last quarter of 2009.

Chinas National Bureau of Statistics also reported that the consumer price index rose 2.4 per cent in March from a year earlier,and that the producer price index was up 5.2 percent. Those figures were generally in line with analysts expectations. The basic conclusion is that the recovery is on track, said Tao Wang,an economist at UBS Securities.

The statistics bureau apparently agreed,repeating in a statement that China would maintain its appropriately loose monetary policy and an expansionist fiscal policy. Wang said that the comparatively modest inflation figures may dissuade the government from quickly raising interest rates,as many analysts have recently forecast. She added,however,that the low inflation rate stemmed partly from a seasonal decline related to the end of Chinas Lunar New Year holiday and that inflation would be likely to pick up in coming months.

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The government said consumer prices were basically stable. In an apparent indication of its confidence that inflation was in check,the government raised retail gasoline prices by as much as 5 per cent on Wednesday,the first increase in gas prices since in more than five months.

The inflation figures also may give the government some leeway in making two crucial economic decisions that affect inflation: raising interest rates and revaluing Chinas currency,the renminbi. China has come under rising pressure at home and overseas both to raise rates and to let the renminbis value rise.

They would prefer not to hike both rates and the currency simultaneously, Ben Simpfendorfer,the chief China economist for the Royal Bank of Scotland in Hong Kong,said in a telephone interview. A CPI of less than 3 per cent presents them with that window to adjust the currency first before hiking rates late.

Both the US and,increasingly,Chinas Asian trading partners complain that China has held the renminbis value artificially low,giving Chinese exports a price advantage on global markets. Letting the currency rise would address that and reduce inflationary pressures by making imports cheaper.