China’s economy has grown at the fastest pace in three years to expand by 11.9 per cent during the first quarter. The stronger than expected growth heated up speculation that Beijing may finally allow the Chinese currency’s artificially low exchange rate to start rising.
The figures indicated that domestic demand and exports are steadily improving in the world’s third-largest economy. But a day before the results were released, China’s Cabinet warned that the economy and its road to recovery remain ‘very complicated’.
Property prices are soaring, banks have already lent 35 per cent of the year’s annual loan target of 7.5 trillion yuan and millions of farmers are battling a severe drought. But the Chinese economy notched a double-digit pace for the second straight quarter, following 10.7 per cent growth in the last quarter of 2009, and an overall 8.7 per cent growth that was faster than any nation last year.
An official spokesman admitted that the growth figures should be read in the context of the $565-billion government stimulus issued since late 2008. “The 11.9 percent growth is largely a result of last year’s low comparison base and the government’s stimulus,” said Li Xiaochao, spokesman of the National Bureau of Statistics in Beijing.
Banks raised their China forecasts for 2010 to 10 per cent or slightly more though the official target remains a modest 8 per cent. J.P. Morgan revised its China 2010 GDP forecast from 10 per cent to 10.8 per cent.