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China's economy cools in Q2 amid battle against inflation
By Zi Chen |
July 13, 2011, Wednesday
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Online Edition
Online Edition
CHINA'S economic growth slowed to 9.5 percent in the second quarter of this year as the central government acted to curb credit expansion and rein in inflation, whose June reading was the fastest in three years.
Gross Domestic Product totaled 20.44 trillion yuan (US$3.14 trillion) for the first half of 2011 and annualized growth rate reached 9.6 percent for the six-month period, the National Bureau of Statistics said today. That compared with a 9.7 percent rise in first-quarter GDP.
The April-June growth was the slowest since the third quarter of 2009, when China's economy expanded 9.1 percent amid the fallout of the global financial crisis. This year, Chinese policy makers have been stepping up efforts to cool price expansion but still hope such moves won't choke economic growth.
The Consumer Price Index, the main gauge of inflation, climbed 6.4 percent from a year earlier in June, the top statistics bureau said on Saturday. It was a sharp jump over May's 5.5 percent as costs of food rocketed 14.4 percent, up from 11.7 percent a month earlier.
Pork prices even gained an annualized 57.1 percent, the bureau said. Producer Price Index, the factory-gate measurement of inflation, swelled 7.1 percent year on year last month, compared with 6.8 percent in May.
China's new loans in June also exceeded estimates to 633.9 billion yuan. M2, the broadest measure of money supply, rose by a more-than-forecast 15.9 percent, rebounding from the slowest gain since 2008 the previous month, although still within the central bank's full year target of 16 percent.
China announced an interest rate increase of 25 basis points on June 6, the third time this year and the fifth increase since October when the country shifted to a prudent monetary policy stance.
The central bank has also raised requirements nine times since mid-November to a record 21.5 percent for the biggest banks, with the most recent hike announced on June 14.
Premier Wen Jiabao said on Tuesday that the Cabinet will continue to give its top priority to taming inflation by maintaining a prudent monetary policy stance. He also said that the government will try to avoid any big swings in economic growth caused by excessive tightening.
"We must avoid the combination of lagging effects of monetary policy and other factors to cause big impacts on future real economic operation," Wen said in a statement published on the central government's website www.gov.cn.
Wen reiterated that the general direction of China's monetary policy will not change, but stressed the government should fine-tune its policies when necessary.
Wen said last month the government may fail to keep price gains within this year's 4 percent target although they could be kept below 5 percent.
People's Bank of China governor Zhou Xiaochuan said last week inflation can't be the government's only policy target and that it needs to consider goals including growth, employment and the exchange rate.
Economists said that the comments showed that China faces increasing "dilemmas" in terms of both sustaining economic growth and combating price growth. But many of them don't expect the government to loosen policies soon.
China may not have conditions for loosening in its monetary policy at the current stage, the Economic Information Daily reported today, citing Ba Shusong, a researcher at the State Council's Development Research Center.
The country may make small adjustments to its monetary policy while keeping it "generally tight", Ba was quoted as saying. China should continue to raise interest rates if consumer prices remain high in the third quarter, according to Ba.
Gross Domestic Product totaled 20.44 trillion yuan (US$3.14 trillion) for the first half of 2011 and annualized growth rate reached 9.6 percent for the six-month period, the National Bureau of Statistics said today. That compared with a 9.7 percent rise in first-quarter GDP.
The April-June growth was the slowest since the third quarter of 2009, when China's economy expanded 9.1 percent amid the fallout of the global financial crisis. This year, Chinese policy makers have been stepping up efforts to cool price expansion but still hope such moves won't choke economic growth.
The Consumer Price Index, the main gauge of inflation, climbed 6.4 percent from a year earlier in June, the top statistics bureau said on Saturday. It was a sharp jump over May's 5.5 percent as costs of food rocketed 14.4 percent, up from 11.7 percent a month earlier.
Pork prices even gained an annualized 57.1 percent, the bureau said. Producer Price Index, the factory-gate measurement of inflation, swelled 7.1 percent year on year last month, compared with 6.8 percent in May.
China's new loans in June also exceeded estimates to 633.9 billion yuan. M2, the broadest measure of money supply, rose by a more-than-forecast 15.9 percent, rebounding from the slowest gain since 2008 the previous month, although still within the central bank's full year target of 16 percent.
China announced an interest rate increase of 25 basis points on June 6, the third time this year and the fifth increase since October when the country shifted to a prudent monetary policy stance.
The central bank has also raised requirements nine times since mid-November to a record 21.5 percent for the biggest banks, with the most recent hike announced on June 14.
Premier Wen Jiabao said on Tuesday that the Cabinet will continue to give its top priority to taming inflation by maintaining a prudent monetary policy stance. He also said that the government will try to avoid any big swings in economic growth caused by excessive tightening.
"We must avoid the combination of lagging effects of monetary policy and other factors to cause big impacts on future real economic operation," Wen said in a statement published on the central government's website www.gov.cn.
Wen reiterated that the general direction of China's monetary policy will not change, but stressed the government should fine-tune its policies when necessary.
Wen said last month the government may fail to keep price gains within this year's 4 percent target although they could be kept below 5 percent.
People's Bank of China governor Zhou Xiaochuan said last week inflation can't be the government's only policy target and that it needs to consider goals including growth, employment and the exchange rate.
Economists said that the comments showed that China faces increasing "dilemmas" in terms of both sustaining economic growth and combating price growth. But many of them don't expect the government to loosen policies soon.
China may not have conditions for loosening in its monetary policy at the current stage, the Economic Information Daily reported today, citing Ba Shusong, a researcher at the State Council's Development Research Center.
The country may make small adjustments to its monetary policy while keeping it "generally tight", Ba was quoted as saying. China should continue to raise interest rates if consumer prices remain high in the third quarter, according to Ba.
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