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From the South China Morning Post.

Mainland's GDP growth slows to 10.1pc
Yuan falls, banks alter forecasts as pace of economic expansion eases
Cary Huang in Beijing
Jul 18, 2008
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The mainland's economic expansion slowed in the second quarter as Beijing's tightening measures kicked in and exporters felt the effects of the global growth slowdown.

Gross domestic product grew 10.1 per cent year on year for the quarter - the smallest increase since the last quarter of 2005 and down from 10.6 per cent in the first quarter, as slower export growth and natural disasters, particularly the Sichuan earthquake in May, took their toll.

In the first half, GDP expanded 10.4 per cent from a year earlier, a drop of 1.8 percentage points from the same period a year earlier.

The figures prompted investment banks to cut their full-year growth forecasts and fuelled speculation that the government may have to adjust macroeconomic policy to stop growth slackening off too much.

Li Xiaochao, a spokesman for the bureau, said the first-half GDP figure showed the government was succeeding in slowing the pace of growth to produce more stable economic development.

Last year, GDP grew 11.4 per cent. The government hoped to apply the brakes and set a goal of 8 per cent GDP growth this year.

"This year we have faced difficulties and challenges from both outside and domestically," Mr Li said. "However, the economy still maintained stable and fast growth. We have still achieved good results by carrying out accurate, timely macroeconomic control measures."

Inflation remains a worry, though. The consumer price index rose 7.1 per cent year on year in June, against 7.7 per cent in May. For the first six months, inflation was 7.6 per cent, the National Bureau of Statistics said yesterday.

Mr Li admitted that inflation, fuelled by rapidly rising prices for commodities, such as grain and oil, was a major concern. The producer price index in June rose 8.8 per cent from a year earlier. In May it rose 8.2 per cent. Inflation is so far above the full-year target of 4.8 per cent that the goal will be impossible to achieve.

Mr Li said the government had no plans to end price controls, which apply particularly to basic foodstuffs, because it wants to lessen the impact of price rises on the rural poor.

Qu Hongbin, chief China economist with British bank HSBC (SEHK: 0005, announcements, news) , said growth had slowed because of the impact of falling demand for exports, policy tightening and the earthquake, but was still strong.

The yuan fell the most in seven weeks following the release of the data. Markets speculated the government would slow the pace of its appreciation to protect exports and help create jobs.

Goldman Sachs lowered its projections for GDP growth to 10.1 per cent this year, from 10.5 per cent previously. Its economists Hong Liang and Yu Song dropped their prediction of two interest-rate rises this year. They now expect none.

JPMorgan nudged its growth forecast for this year down to 10.2 per cent, from 10.5 per cent. Jing Ulrich, the bank's China equities chairwoman, said: "A slower pace of appreciation would mean breathing room for the export sector."

Mainland shares fell for a third consecutive day on concerns of a slowdown in growth.

Yesterday's data gave further evidence the economy is relying less on exports for growth while domestic demand and consumption rise.

Retail sales grew 21.4 per cent year on year in the first half, to 5.1 trillion yuan, while export growth fell by 5.7 percentage points. The mainland's trade surplus with the rest of the world fell by 11.8 per cent.