15 April 2011 06:13 [Source: ICIS news]
(adds analyst comments, with recast throughout)
GUANGZHOU (ICIS)--China’s economy expanded at an annual rate of 9.7% in the March quarter, slowing further from the 9.8% pace recorded in the fourth quarter of 2010, as the country continued to tighten its monetary policy to curb inflation, according to official statistics released on Friday.
Inflation in the world’s second-biggest economy hit a 32-month high of 5.4% in March, according to official data released by the National Bureau of Statistics (NBS).
The People’s Bank of China (PBoC) implemented two policy rate hikes so far this year to mop up excess liquidity in its financial system that is causing strong inflationary pressures. It also raised the banks' reserve requirement ratio three times since the start of the year.
In 2010, PBoC raised the banks’ reserve requirement ratio, the portion of deposit that must be parked with the central bank, six times and implemented a policy rate hike in October - the first after keeping interest rates steady for nearly three years, to control release of loans following a lending binge in 2009.
Early this week, 24 chambers of commerce under the government-backed All-China Federation of Industry and Commerce (ACFIC) jointly issued a call to stabilise prices of consumer goods.
The agriculture, fishery, pharmaceuticals, property, paper and textiles industries are all represented in ACFIC.
“The effects of those measures will be seen two to three months later and we expect inflation to ease by the third quarter,” said Qiu Yaxuan, chief economist at Shenzhen-based brokerage China Merchants Securities.
“Industrial growth and investment are already contracting and once the economy cools down, prices would lose its driving force,” said Qiu of China Merchants Securities.
Analysts said that
“There won’t be any foreseeable problems for the Chinese economy and growth will continue,” said Wang of the GTJA.
Additional reporting by Nurluqman Suratman
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