MARKETS WOBBLE AS CHINA HITS OVERDRIVE By Richard McGregor in Beijing and Dave Shellock in London
Friday, April 20, 2007
Global markets wobbled yesterday after figures showed China's economy went into overdrive in the first quarter, heightening the prospect of further rate rises and monetary tightening.
Confounding analysts who had expected the economy to slow slightly this year, the National Bureau of Statistics in Beijing announced that gross domestic product increased 11.1 per cent in the first quarter compared with 10.4 per cent in the final three months of 2006.
China has grown by more than 10 per cent for the past four years in succession, leading many economists to predict, at various points along the way, “hard” or “soft landings” for the economy.
“This economy has not landed – it has refuelled in mid-flight and is flying higher again,” said Stephen Green, of Standard Chartered bank in Shanghai.
Inflation was higher, reaching 3.3 per cent in March, a level outside the central bank's comfort zone of below 3 per cent. But concern was muted as most of the CPI increase resulted from rising food prices, with core inflation remaining low.
In energy-intensive industries, rolled steel production was up year-on-year 26 per cent; alumina 54 per cent and aluminium 43 per cent.
China's stock market dropped nearly 5 per cent before the release of the GDP figures, a fall attributed by many analysts to concern about measures to rein in growth that might result from the data. The fall saw other markets in the region falter.
European equity markets opened under pressure but regained some of their composure by the end of the day. In London, the FTSE 100 index ended just 0.1 per cent lower, with mining stocks suffering most.
On Wall Street, the S&P 500 index had edged into positive territory by midday and the Dow Jones Industrial Average had inched back towards Wednesday's record high.
