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Last Updated: Thursday, 19 July 2007, 06:59 GMT 07:59 UK
Chinese economy refuses to cool
Chinese shopper
Chinese inflation is at its highest for nearly three years
China's economy outstripped analysts expectations during the second quarter and grew by 11.9% from a year before, according to new government figures.

It came despite government measures in the first six months of the year to cool the economy, which had grown 11.1% in the three months to March.

Government spokesman Li Xiaochao said the government would "improve macro controls" to rein in the economy.

The rapid growth has pushed inflation to a 33-month high.

'Overheated'

A boom in production, fuelled by strong exports and investment, is contributing to the inflationary risks the country now faces.

Government figures showed that annual consumer inflation in June reached 4.4%.

Inflationary fears have also hit confidence in the Chinese stock market recently.

Other pressures on the economy include the imbalance in international trade and pressures on energy conservation and pollution reduction.

"Economic growth is overheated now," said Fu Chunjiang, an analyst with Sinolink Securities in Shanghai.

"I think investment and CPI growth have gone beyond the government's comfort zone and the authorities will issue more tightening measures and strengthen the implementation of previous ones."

'Industrial structure'

The new figures show that China's factories have continued to speed up production, with industrial output up 18.5% in the first half of 2007.

Fixed asset investment, a measure of mostly government spending in infrastructure, rose 25.9% in the six months.

National Bureau of Statistics spokesman Li Xiaochao said the government "will continue to strengthen and improve macro-control measures".

He added: "We will continue to enhance the adjustment of the industrial structure to change the growth pattern and to enable the economy to grow healthily and quickly."

Last week China said the trade surplus for the first half of the year had soared to $112.5bn.




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