China Economy Grows 11.9%

China’s economic growth accelerated to the fastest pace in almost three years in the first quarter, adding pressure on Premier Wen Jiabao to sever the yuan’s peg to the dollar and raise interest rates., Bloomberg 4/15/2010 12:15:06 AM

Gross domestic product rose 11.9 percent from a year earlier, the statistics bureau said.

Property prices rose by a record in March and foreign-exchange reserves climbed the most in four months, the government said this week.

China’s cabinet yesterday signaled caution in ending crisis policies even after exports jumped 29 percent in the first quarter from levels depressed by the financial crisis a year earlier.

Economic growth was largely driven by stimulus policies and a comparison with low levels in 2009, the State Council said. Officials pledged to do more to rein in the property market.

Industrial production rose 18.1 percent in March and retail sales climbed 18 percent, today’s data showed. Car sales leapt 76 percent in the first quarter from a year earlier, with Mercedes-Benz (China) Ltd. reporting a doubling.

The central bank is yet to raise interest rates after cuts to counter the financial crisis, instead targeting a 22 percent reduction in new loans from last year’s record of $1.4 trillion.

Urban fixed-asset investment increased 26.4 percent in the first quarter from a year earlier. Producer prices rose 5.9 percent in March, after climbing 5.4 percent in February.

Some investors, including hedge fund manager Jim Chanos, already see a property bubble in China that could reverberate around the world if it bursts.

Residential and commercial real-estate prices in 70 cities climbed 11.7 percent in March from a year earlier, the most since data began in 2005. Guangzhou-based Evergrande Real Estate Group Ltd. said sales jumped 175 percent in the first quarter.

The State Council said last night that officials will speed the study of a property tax that could help to cool the market, after already tightening mortgage lending and re-imposing a sales tax.

The central bank has twice asked lenders to set aside more cash as reserves this year. Deputy governor Zhu Min said last month that China will be very careful” with interest rates because they are a heavy-duty weapon” and alternative measures are working well.

China Economy Grows 11.9%