China's economic growth slowed to 10.3 per cent in the second quarter as the government reined in lending spree and property prices amidst fears that the world's fastest-growing economy was overheating.
"The data confirms that China's economy is slowing down at a very rapid pace," World Bank economist Louis Kuijs told HT in Beijing. "The slowdown is not to be worried about. We expected it and the pace is still respectable. Growth remains good."
The second quarter growth showed a dip compared to the nearly 12 per cent growth in the first quarter. But numbers for the first six months showed that the economy expanded by an impressive 11.1 per cent and foreign direct investment rose by 19.6 per cent. Inflation has also slipped below Beijing's official 3 per cent target.
Kuijs forecasts that the slowdown will continue and China's economy will grow 9.5 per cent this year and 8.5 per cent in 2011, rapidly narrowing the gap with India's GDP growth. "The slowdown is in part engineered as the government tries to exit stimulus, and partly because of the global slump."
"The government expected the slowdown...it will help transform the growth pattern and prevent overheating," said Sheng Laiyun, spokesperson, National Bureau of Statistics, in Beijing. Growth of factory output slowed significantly, rising 13.7 per cent in June compared to 16.5 per cent growth in May.
"By 2010-end, export growth may also be down to zero," cautioned Tao Wang, head, China Economic Research at UBS Securities in a note this week.
Beijing has set a modest official target of eight per cent annual economic growth. According to predictions by the International Monetary Fund, the Chinese economy will grow by 10.5 per cent in 2010, and India by 9.4 per cent. China recently revised its 2009 GDP growth to 9.1 per cent from 8.7 per cent. The Indian economy grew by 7.4 per cent in 2009.