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Last Updated: Friday, 16 July, 2004, 04:46 GMT 05:46 UK
China succeeds in slowing growth
Workers walk below power lines near a power plant in Beijing
The Chinese authorities have managed to slow investment
Economic growth slowed in the second quarter in China, with GDP up 9.6% on a year ago, compared with a 9.8% rise in the first quarter.

It suggests government limits on borrowing, and other measures to curb investment and growth, may be working.

Banks have been told to hold more money in reserve and to provide fewer loans.

Inflation was up 5% in the year to 30 June, but fell 0.7% in June from May, suggesting the central bank may not need an interest rate rise.

Any hike would be the first in nine years.

Property sector

China has avoided raising rates to cool growth, over worries it would make it harder for state firms to repay their debts.

Instead, the financial authorities have curbed lending and investment projects, particularly in the property and automobile sectors.

The government will try to introduce these regulations, but the banks aren't really taking heed
Reed Hatcher, Debenham Tie Leung

There has also been a tightening of land-use rules to slow industrial developments.

Analysts had been expecting GDP to grow around 10.5% year-on-year.

"It is lower than we'd expected - not dramatically so, and we don't think it argues for a hard landing," said JP Morgan economist Ben Simpfendorfer.

"But it does suggest that fixed-asset spending was considerably weaker than we'd expected in the final month (June)."

Cheap labour

Earlier this week it was revealed that the flow of foreign investment into China shows no sign of slowing down.

Despite the efforts by China's government to cool its fast-growing economy, the country drew in almost $8bn (4.3bn) of foreign direct investment last month.

June's $7.97bn figure was up 14% on the previous high of $7.66bn set in the same month last year.

Foreign firms are attracted by China's vast pool of cheap labour and growing economy.

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