China's breakneck economic growth slowed in the second quarter of the year, data released Thursday shows, creating fresh doubts about Beijing's ability to lead the world out of a lingering recession.
China's gross domestic product grew by an impressive-sounding 10.3 per cent between April and June, when compared to the same three-month period in 2009. However, that represented its weakest pace of growth since the third quarter of last year, and some economists believe it may mark the beginning of a slowdown in the world's third-largest economy as the effects of a massive government stimulus package - introduced at the height of the global economic crisis - begin to wear off.
"While the (year-over-year) growth of GDP remains at a relatively high level of 10.3 per cent, we believe its (quarter-over-quarter) growth of 8 per cent annualized represents its underlying growth better," Goldman Sachs economists Yu Song and Helen Qiao wrote in a note to clients. "If anything, this 8 per cent growth still overstates the latest activity."
Analysts at Citigroup in Hong Kong said that while the numbers represented a "moderation" of China's runaway growth - rather than the beginning of a feared "double-dip" recession, "we may have seen the last double-digit GDP growth quarter in at least the coming year."
Many economists were concerned that industrial output grew by a relatively modest 13.9 per cent in June, down from 16. 5 per cent in May while marking the slowest pace of expansion in nearly a year. Export and import growth also fell in June compared to May.
The Chinese government, however, cast the numbers as nothing unexpected, pointing out that the second quarter numbers suffered in comparison to exceptionally strong growth of 11.9 per cent in the first three months of the year. (The first quarter numbers were boosted by the fact they were compared to first three months of 2009, which marked the pit of China's brief economic downturn.) There was also some unexpected good news for the government to focus on, as inflation dipped to 2.9 per cent in June from 3.1 per cent the previous month, defying predictions that consumer prices would continue to rise.
"Even if (second quarter) growth slowed, it is still well within our comfort band. It is still a very high figure and is in line with average growth over the past decade," said Sheng Laiyun, a spokesman for the National Bureau of Statistics. "This was well within the expectations and targets of our policies. The slowing will help our economy avoid overheating and assist in the transformation of our economic model."
The Shanghai Composite Index, however, fell 1.9 per cent following the release of the new data, extending a slide that has seen it plunge 26 per cent in 2010, making Shanghai the worst performing index in Asia.