by Paul Hong

GDP grew by 8.1 per cent in first quarter of 2012. Exports and domestic demand remain low. Government raises bank reserve ratio stoking inflation. World Bank sees a slower Chinese economy.

Beijing (AsiaNews) - China's economy grew by 8.1 per cent in the first three months of 2012, its slowest pace in nearly three years, the National Bureau of Statistics (NBS) said, because of the "complex" global situation and the "enormous" pressure on exports growth.

Growth still exceeds this year's government target of 7.5 per cent, as China's economy remains one of the best in Asia and the world. However, the slower pace is a sign of falling domestic and foreign demand, especially in Europe and the United States, which are still in the middle of a deep economic crisis. The net effect is plant closures, higher unemployment and rising social tensions.

China's central bank in February cut the amount of cash banks must hold in reserve for the second time in three months to increase lending and boost domestic consumption.

For analysts, lending should further increase. In March, it rose sharply, with banks issuing 1.01 trillion yuan in new loans (US$ 160 billion), up from 710 billion yuan (US$ 110 billion) in February. Greater lending however raises the threat of higher inflation.

Consumer prices in March rose by 3.6 per cent from a year earlier, lower than the government's target of 4 per cent for the year. However, the figures are not very reliable. A few months ago, the government had reported a higher rate of inflation at 4.2 per cent, more so for basic items and food prices, which increased by up to 30-40 per cent.

For its part, the World Bank recently forecast that the Chinese economy could slow down even further.

 

• china
• economy
• inflation
• slowdown
• lending