Currency rise expected as China growth soars 11.9pc
THE latest surge in China's growth is welcome news for the global recovery and could give Beijing room to let the yuan rise, while adding to pressure to take that step to help cool inflation.
Growth in the world's third-largest economy accelerated to 11.9 percent in the first quarter, the government reported yesterday. Inflation stayed low, allowing Beijing to avoid drastic steps to slow its boom, which is driving demand for foreign raw materials and consumer goods.
Such growth could help offset potential losses to China's exporters from any gains in the value of the yuan, enabling Beijing to go ahead with a widely expected but modest loosening of currency controls.
President Hu Jintao and other leaders have rejected American pressure over currency, saying China will move at its own pace. But opinion within China's economic leadership is divided and most analysts expect Beijing to let the yuan rise sometime this year.
"It will be painful for China to let the yuan appreciate, but I think it will soon after May, though it will certainly be very slow and controlled," said Qian Qimin, a senior analyst.
The government said stimulus measures would remain in place despite the faster growth. It has been gradually lowering bank lending and tightening lending standards but has avoided major changes.
"We face a very complicated external environment, because globally we are seeing a very slow and uneven pace of recovery," said Li Xiaochao, a spokesman for the National Bureau of Statistics.
Prices rose by a modest 2.2 percent for the quarter after inflation eased to 2.4 percent in March from February's 2.7 percent. But many economists say China risks overheating.
Housing prices rose 11.7 percent in March from a year earlier, their fastest increase ever. The cabinet has announced new measures to curb speculative buying blamed for the boom.
It raised the minimum downpayment for purchases of second homes from 40 percent to 50 percent. Buyers of third homes face even tougher requirements. The government also said it would free up more land for residential housing.
"People say China's property market now is even hotter than the US or Dubai's was, and I completely agree with this," said Mao Yushi, a prominent economist and commentator.
"I fear the strong growth will blow into a bubble economy, and we all know how dangerous that is."
Global markets rose on the news from China, but the country's own benchmark Shanghai index declined on lingering concerns about a possible rate hike.
Mao said he expects the government to finally tackle the currency issue -- a chronic irritant in relations with Washington, which has lobbied Beijing to let the yuan rise against the dollar from the level where it has been frozen since 2008.
Singapore has reported first quarter growth at 32.1 percent, the fastest rate in 35 years, prompting its central bank to announce it would let the country's currency rise to tamp down inflation. (AP)