11.9% growth sparks fears of overheating
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The economy grew by a better-than-expected 11.9 percent year on year in the first quarter, official figures showed Thursday, prompting renewed calls for tighter policies to prevent overheating.
The blistering rate is the fastest since 2007 and the figure is 5.7 percentage points higher than the same period last year, and 1.2 points higher than the last quarter, according to the National Bureau of Statistics.
The consumer price index (CPI), a key gauge of inflation, rose 2.2 percent in the same period. It grew by a mild 2.4 percent in March, compared to 2.7 percent in February.
Li Xiaochao, spokesman for the bureau, said the data suggest a "very good beginning" for this year's economic performance, and attributed the robust growth to the fast expansion of domestic demand.
Li said consumption contributed 52 percent of GDP growth in first quarter.
However, he added that "the current economic situation is still extremely complex and we still face many problems in the process of recovery".
The contribution of investment to GDP growth declined sharply, from 94.6 percent for the whole of 2009 to 57.9 in the first quarter.
Hu Shaowei, senior economist with the State Information Center, said: "Consumption still has a more active role to play in pulling up the economy," and predicted growth would remain stable this year.
But Dong Xian'an, chief economist at Industrial Securities, said consumption could contribute less to growth as the investment spree has yet to slow down.
In the first quarter, investment in fixed assets reached 3.53 trillion yuan ($517 billion), up 25.6 percent year on year. Investment in the real estate sector soared 35.1 percent.
"Consumption is still not the real driving force behind economic growth," said Dong, saying signs of overheating are already obvious enough for the government to consider raising interest rates.
Zhuang Jian, a senior economist with the Asian Development Bank, said in an earlier interview that the government should adopt more prudent monetary policies if growth in the first quarter were more than 10 percent.
But Hu at the State Information Center said it is too early to say the economy is overheating based on the first quarter figures, given the low base of comparison in the same period last year.
The government must be very careful if it considers tightening measures, he said.
"With growth now strong but headline inflation still subdued, the government has a window of opportunity to rein in the policy stimulus before it tips over into excess," Tom Orlick, an analyst at Beijing for Stone & McCarthy Research Associates, said in a report.
"Growth is running too hot. It requires policy tightening," said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. He called Thursday's data "a dangerous mix" because the low inflation reading would delay a rise in borrowing costs.
The State Council, the cabinet, promised on Wednesday after a preview of the data to stick to the "appropriately loose" monetary stance and active fiscal policy first adopted at the height of the global financial crisis in late 2008.
