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China's economic growth slows amid cooling efforts

In this photo taken Thursday Oct. 13, 2011, sales promoters talk to visitors at a housing fair in Nanjing in eastern China's Jiangsu province. China's rapid economic growth eased in the latest quarter of 2011 as the government tried to prevent overheating. Beijing has repeated hiked interest rates and imposed curbs on construction and other investment to prevent runaway growth. In this photo taken Thursday Oct. 13, 2011, sales promoters talk to visitors at a housing fair in Nanjing in eastern China's Jiangsu province. China's rapid economic growth eased in the latest quarter of 2011 as the government tried to prevent overheating. Beijing has repeated hiked interest rates and imposed curbs on construction and other investment to prevent runaway growth. (AP Photo)
By Joe McDonald
AP Business Writer / October 18, 2011

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BEIJING—China's rapid growth eased last quarter to a still-robust 9.1 percent -- enough to ease concerns of an abrupt slowdown in the world's second-largest economy but too little to buoy the troubled West.

Growth in the three months through September was down from the previous quarter's 9.5 percent and the lowest level in two years, data showed Tuesday. The government said that was in line with plans to steer growth that hit 10.3 percent last year to a more sustainable level and cool politically dangerous inflation.

The moderation amid Europe's debt crisis and high U.S. unemployment might reduce China's contribution to global growth, though analysts say its expansion cannot shore up a slumping world economy on its own.

"This means China itself is still growing well and will continue to generate demand for commodities and exports," said Darius Kowalczyk, senior economist for Credit Agricole CIB in Hong Kong. Still, he said, "I don't think they are going to save the world."

Beijing has repeatedly hiked interest rates and imposed curbs on construction and other investment to prevent runaway growth and cool inflation that surged to a 37-month high of 6.5 percent in July. It has promised to ease some bank lending curbs to help struggling small businesses but analysts expect it to maintain most of its controls.

A government spokesman said the latest data, which also showed strong retail sales and factory production, was evidence Beijing's strategy was working and the economy was on the right track.

"There is quite a strong possibility for China's economy to maintain steady and relatively fast growth," said a spokesman for the National Statistics Bureau, Sheng Laiyun, at a news conference.

Sheng warned China faces "rising risks" due to weakness in key U.S. and European export markets. But he said it is unlikely to suffer a "double dip," or relapse into an economic slump.

China is forecast to account for about one-third of global growth this year. But analysts caution that its consumption and investment are too small to offset lower U.S. and European demand. Its multibillion-dollar trade surplus also limits benefits for its trading partners.

Deutsche Bank economist Ma Jun has estimated China would have to grow by 18 percent this year to make up for a 3 percentage point drop in U.S. and European growth.

The International Monetary Fund is forecasting China's growth this year at 9.5 percent, compared with just 1.5 percent for the United States and a 0.5 percent contraction for Japan -- East Asia's other economic giant.

The latest Chinese growth was the slowest since an 8.9 percent expansion in the third quarter of 2009.

China's retail sales rose 17 percent in September, slightly ahead of the growth rate for the first half of the year, data showed. Factory production rose 14.2 percent over a year earlier for the quarter.

China's exporters have been hurt by weak global demand that saw September export growth tumble to 17.1 percent from August's 24.5 percent. But Sheng said retail sales and other indicators showed the communist government's efforts to reduce reliance on trade by boosting domestic consumption were gaining traction.

Premier Wen Jiabao promised last weekend to help exporters by maintaining a "stable exchange rate," a move that might fuel tensions with Washington over Beijing's currency controls.

China's inflation eased to 6.1 percent in September, though food price inflation held steady at August's level of 13.4 percent. Analysts expect inflation to ease further as the autumn harvest comes in.

China's demand for iron ore, industrial components and other foreign goods already has eased as the government clamped down on a construction boom. Export-driven manufacturers that account for half of the country's imports have reacted to lower orders by cutting purchases of supplies.

Imports of polyester fell 21.7 percent in September from a year earlier while imports of unrefined aluminum declined 7.9 percent, according to customs data. Growth in oil imports declined from last year's double-digit rates to 4 percent.

Weaker Chinese demand is likely to hit other Asian economies that supply its factories industrial components, as well as Australia, Chile and other exporters of minerals such as iron ore and copper.

"China will contribute a significant portion of global growth," said Mark Williams of Capital Economics in London. "But it's a separate issue whether China contributes to growth in the world outside China, and that really depends on whether it can bring its trade surplus down."

Also Tuesday, the government said growth in housing prices and new construction eased in September, another sign efforts to cool the economy are taking hold.

A survey of 70 cities found prices declined in 17 of them from August to September, rose in only one and held steady in the rest, the National Bureau of Statistics said. The number of housing starts rose 8.9 percent over a year earlier, down from a 25 percent gain in the first eight months of the year.

"September probably marked the beginning of a correction, but the central government wouldn't want to stop tightening just yet," said Societe General economist Wei Yao in a report.

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National Bureau of Statistics (in Chinese): http://www.stats.gov.cn