China grows at 9.7%, more than forecast

China’s economy grew a more-than-estimated 9.7 per cent in the first quarter and inflation accelerated in March to the fastest pace since 2008, adding pressure for more monetary tightening.

Consumer prices rose 5.4 per cent from a year earlier, the statistics bureau said at a briefing in Beijing on Friday. The median forecasts in Bloomberg News surveys of economists were for growth of 9.4 per cent and inflation of 5.2 per cent.

China may boost reserve requirements for lenders for the fourth time this year to drain cash from the fastest-growing major economy, Credit Agricole CIB and Australia & New Zealand Banking Group said. Friday’s data may also add pressure for interest-rate increases and faster appreciation in the yuan after food and commodity costs drove inflation higher than the government’s 2011 target for a third month.

“There is little economic moderation despite aggressive monetary tightening,” said Liu Li-Gang, an ANZ economist in Hong Kong who formerly worked for the World Bank. “Inflation remains a top risk.”

The reserve ratio is 20 per cent for the biggest banks and the one-year benchmark for borrowing costs is 6.31 per cent after four rate increases since mid-October. Growth was 9.8 per cent in the fourth quarter of last year. The Shanghai Composite Index closed 0.3 per cent higher. The yuan was little changed at 6.5295 per dollar as of 3.27 pm local time.

ASIAN INFLATION
Inflation pressures across Asia were highlighted by India on Friday reporting a larger-than-forecast 8.98 per cent jump in the wholesale-price index in March from a year earlier. The yield on the 8.08 per cent bond due in August 2022 rose 4 basis points to 8.24 per cent, the highest level since February 8, as of the 5 pm close in Mumbai.

Friday’s data release in China confirmed numbers circulating yesterday, including in a Phoenix Television news report. The statistics bureau condemned any leaks and said offenders will be punished.