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Chinese economy outdoes forecasts China growth points to yuan move
(about 2 hours later)
New figures issued by China show its economy grew at a rate of just under 12% in the first quarter of this year - a higher figure than expected. China's economy grew at an annualised rate of 11.9% in the first quarter of the year, which experts predict could lead to a revaluation of the yuan.
Inflation was 2.2%, which was below market expectations. A huge fiscal stimulus package has increased consumer confidence and boosted spending. The growth figure was slightly higher than expected, while consumer price inflation was surprisingly low at 2.2%.
"We have got off to a good start this year," a Chinese spokesman said."We have got off to a good start this year," a Chinese spokesman said.
However some experts worry the fiscal stimulus package could be stoking up future problems for the economy. The figures have helped to fuel debate among experts about whether the recent fiscal stimulus package could be stoking up problems for the economy.
"There is a lot of talk about overheating," Glenn Maguire, chief economist for Asia Pacific at Societe Generale, told the BBC. "But the classic symptom is inflation."
March's consumer price inflation was 2.4% versus expectations of 2.7%, and producer price inflation was 5.9% versus the expected 6.4%.
"There had been speculation on the back of strong construction data [of] an imminent rate hike," added Mr Maguire. But given the low inflation, he now thinks the next step will be a revaluation of the yuan.
Either policy - a rise in interest rates or an increase in the value of the yuan - could be used to help slow the Chinese economy.
However, China has been under pressure from President Obama to address the yuan, which many commentators say is undervalued and gives the Chinese an unfair advantage in export markets.
'Good foundation'
Cheap and plentiful loans are helping to push up housing prices and raising fears of a bubble, BBC business reporter Linda Duffin says.Cheap and plentiful loans are helping to push up housing prices and raising fears of a bubble, BBC business reporter Linda Duffin says.
That is why mortgage rates have been raised and a new sales tax on homes has been introduced, she adds.That is why mortgage rates have been raised and a new sales tax on homes has been introduced, she adds.
But the low inflation rate in the first quarter eases pressure on Beijing's policymakers to hike interest rates and cool the boom. But the low inflation rate in the first quarter eases pressure on Beijing's policymakers to raise interest rates and cool the boom.
And if the government is successful at keeping growth at a manageable rate, China is likely to overtake Japan as the world's second biggest economy this year, our reporter says.And if the government is successful at keeping growth at a manageable rate, China is likely to overtake Japan as the world's second biggest economy this year, our reporter says.
Li Xiaochao, spokesman for China's National Bureau of Statistics, told reporters in Beijing that the "momentum of national economic recovery" had further expanded and there was "a good foundation for reaching the targets set for the whole year".Li Xiaochao, spokesman for China's National Bureau of Statistics, told reporters in Beijing that the "momentum of national economic recovery" had further expanded and there was "a good foundation for reaching the targets set for the whole year".