Chinese Economy Grows by 11.5 Percent

By JOE McDONALD

BEIJING – China’s supercharged economy grew by a stunning 11.5 percent in the third quarter, slowing slightly but staying on track to overtake Germany as the world’s third-largest within weeks, according to data reported Thursday.

Growth beat economists’ forecasts but was below the 11.9 percent rate the previous quarter. The government said its repeated rate hikes and other controls were finally taking effect.

"Due to macro-economic controls, we have turned the economy from being an overheating one to being one of speedy growth," said a spokesman for the National Bureau of Statistics, Li Xiaochao, at a news conference to announce growth figures.

The communist government wants to maintain fast growth to ease poverty but worries that runaway expansion or overspending on factories and other assets could ignite a financial crisis.

Beijing has raised interest rates five times this year to curb double-digit investment growth, and analysts expect another rate hike later in the year.

The latest figures suggest China’s growth surge has peaked, economists said. They said they expect the expansion to slow further while staying above an annual rate of 10 percent next year.

"While 11.5 percent growth is still a very strong number, we judge the moderation in Q3 is probably a turning point for China’s economic growth in the quarters to come," Lehman Brothers economist Minchun Sun said in a report to clients.

China’s recent surge has prompted foreign analysts to raise forecasts for this year’s growth to as high as 11.5 percent. It would be the fifth straight year of double-digit expansion.

Also in September, inflation eased slightly, with consumer prices up 6.2 percent over the same month last year, down from an 11-year high of 6.5 percent in August, the government said.

Authorities have blamed a recent spike in inflation on a shortage of food items, especially pork, and say it should ease as government efforts to encourage farmers to raise more pigs take effect.

Chinese leaders "have managed to weather this latest inflation spike storm and are headed for smoother sailing," said Tim Condon, chief Asia economist for Dutch bank ING.

Condon said he expects the growth rate to ease further while staying above 11 percent for the fourth quarter and declining to 10.5 percent next year.

Li, the statistics bureau spokesman, said the government also is making progress in efforts to ease dependence on exports by encouraging Chinese consumers to spend more.

Beijing also has imposed economic curbs ranging from a ban on building new luxury villas to taxes meant to discourage exports of steel and other products deemed too dirty or energy-intensive.

Still, investment in factories and other urban assets surged by 24.8 percent in September, according to the statistics bureau.

Li said China’s growth should not be affected by U.S. credit market turmoil. But he said economic performance in the coming year was uncertain due to rising oil prices and a possible global slowdown.

Total third-quarter economic output was $2.2 trillion, according to the statistics bureau.

China is on track to overtake Germany in December or early in 2008 as the world’s third-largest economy after the United States and Japan. But per capita income for China’s population of 1.3 billion people will still be far smaller than that of those economies.

China reported total economic output last year of $2.7 trillion, compared with Germany’s $3 trillion. Germany is forecasting 2.3 percent growth this year, well below China’s brisk rate.

Li said China still faces pressure from rising prices for labor and imported oil and grain.

"We can see that inflation growth is slowing down, but the pressure is still there," he said.