China's economy grew faster than expected in the second quarter, easing fears of a hard landing and strengthening Beijing's resolve to fight persistently high inflation. China's statistics office said on Wednesday that stabilising prices remained the top priority, even though a "complex and volatile" global economy posed a threat to growth, complicating the policy choices.
Second-quarter gross domestic product rose 9.5 percent from a year earlier, exceeding economists' forecasts for 9.4 percent growth, helped by solid domestic consumption and investment. But that was still the slowest pace since the third quarter of 2009, when the world economy was pulling out of its worst recession in 80 years.
Some cooling was expected - and even welcome - because China has raised interest rates and clamped down on bank lending to try to ease inflation, which hit a three-year high in June. The stronger-than-expected GDP figures suggest Beijing may have more room to tighten without choking off growth. "These are very good numbers," said Liu Li-Gang, an economist with ANZ in Hong Kong.
China's GDP in April to June rose 2.2 percent from the first quarter on a seasonally adjusted basis, a slight pick-up in pace from 2.1 percent in the first quarter. Chinese officials have struck a hawkish note in recent days, mindful of the risk that overheating inflation could stoke civil unrest. Although many economists think overall inflation pressures will ease during the second half of the year, prices have soared for popular staples such as pork and it will take time for them to recede.
Europe's sovereign debt troubles and a slowdown in the US economy means two of China's best export customers are struggling. New export orders slipped in June, a manufacturing survey showed earlier in July, which raised questions about China's growth prospects. But Wednesday's figures suggested domestic demand remains robust. Final consumption contributed 4.6 percentage points to first-half growth, while exports subtracted slightly, China's statistics bureau said. Industrial output rose 15.1 percent in June from a year earlier, the strongest growth since May 2010. It also marked a sharp quickening from May's 13.3 percent and beat market expectations of 13.1 percent.