China’s GDP Rises 11.9 Percent in Q1, CPI Up 2.2 Percent

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Apr. 15 – China’s economy grew at an accelerated rate of 11.9 percent year on year in the first quarter of 2010 to US$1.19 trillion, 5.7 percentage points higher than the corresponding period the previous year, according to the National Bureau of Statistics.

The economy grew at the fastest rate in nearly three years and was above the expected growth of 11.5 percent, indicating recovery from the Global Financial Crisis, but also raising concerns of overheating and inflation.

According to China’s State Council, the first quarter growth was largely due to low base effects from the previous year, but also includes factors like rapidly rising real estate prices. The pace of growth may put pressure on the government to consider monetary tightening measures, including currency appreciation and increasing interest rates.

China’s consumer price index, a main gauge of inflation, is up 2.2 percent in the first quarter year on year, and rose 2.4 percent in March. The producer price index, a major measure of inflation on the wholesale level, rose 5.2 percent in the first quarter compared to the previous year and up 5.9 percent in March.

“In the absence of a dramatic fall in external demand, it is critical for the government to tighten policy more decisively than they have been doing in order to prevent overheating,” said Yu Song and Helen Qiao at Goldman Sachs in a report to clients.