China's GDP up 9.6% in H1, Q2 growth slows to 9.5%

Benbenbull

BEIJING - China's economic growth rate is decelerating, and many officials and analysts believe the moderation is healthy and will not lead to a hard landing.

Gross domestic product (GDP) rose by 9.5 percent year-on-year in the second quarter of 2011, tapering off slightly from the 9.7-percent growth posted in the first quarter and 9.8 percent in the fourth quarter of last year, the National Bureau of Statistics (NBS) said Wednesday.

According to preliminary statistics, the country's GDP reached 20.45 trillion yuan (3.15 trillion U.S. dollars) in the first six months, up 9.6 percent year-on-year, NBS spokesman Sheng Laiyun told a press conference.

Sheng called the growth deceleration a desired outcome of macro regulation, which was also "normal" after the ending of some stimulus policies.

"The country's economic development is now shifting to self-initiated growth from previous overheated expansion spurred by the economic stimulus," he said.

Although some economic indicators declined, he noted the country's economic performance was "generally good" and had developed according to macro-economic regulation in the first half.

"The momentum of China's economic growth remains strong and the risk of a sharp growth plunge is slim," he said.

On an annual basis, both retail sales and industrial production registered double-digit increases in the first half and in June alone. Fixed assets investment surged 25.6 percent year-on-year from January to June.

According to the NBS data, consumer spending contributed 4.6 percentage points to the country's GDP growth in the first half, investments made up 5.1 percentage points while foreign trade deducted 0.1 percentage points.

Consumer price index (CPI), the main gauge of China's inflation, rose 5.4 percent year-on-year in the first half of the year, accelerating from 5 percent in the first quarter and above the government's target of 4 percent for this year.

At the beginning of the year, the Chinese government has made ensuring price stability a top priority for 2011 and announced an array of targeted policies.

To soak up liquidity, China's central bank has raised the benchmark interest rates three times this year and hiked the reserve requirement ratio for banks six times.

The interest rate increases will affect China's economy in the near term, but in the long run the rises will boost the sustainable development of the economy, Sheng said.

The country will maintain its macroeconomic policy stance and continue to prioritize price stability during the rest of the year, he said.

With the inflation rate staying stubbornly high and an economic growth plunge unlikely, "we believe there will be no let-up in the monetary policy during the second half of the year and another interest rate increase is possible in the coming months," said Peng Wensheng, analyst with China International Capital Corp.