China's economy soared by a stunning 10.2 percent in the first quarter of this year, fueled by strong investment, a government spokesman said in Beijing on Thursday, while fanning away worries that the economy might be overheated.
Gross domestic product, the broadest measure of goods and service output, reached 4.33 trillion yuan (about 540 billion U.S. dollars), Zheng Jingping, spokesman of the National Bureau of Statistics, announced at a press conference held in Beijing on Thursday.
"The growth seems to be on the fast side, but I want to say such a rate still falls in the range of potential economic growth. It remains basically normal, though reaching the upper limit," he said.
"It should arouse concern, and actually has aroused our attention," Zheng added.
China's consumer price index, or the leading measure of inflation, climbed only 1.2 percent in the first three months. Economists are wary of a possible deflationary trend, citing the CPI growth of 1.8 percent in 2005.
In an interview with Xinhua, Wang Xiaoguang, a macro-economics research fellow with the National Development and Reform Commission, said he believes the economy is driven by hefty investment.
Investment in roads, factory equipment and other fixed assets totaled 1.39 trillion yuan, a sharp growth of 27.7 percent, or an increase of 4.9 percentage points year on year.
Investment in urban areas increased 29.8 percent to 1.16 trillion yuan, while that in rural areas reached 230 billion yuan, up 18.1 percent. China is launching a massive "socialist new countryside" campaign to boost rural development, in a bid to narrow a yawning urban-rural gap.
Wang said local governments arranged excessive big projects in 2006, the first year for China's 11th five-year development blueprint.
He called for intensified government efforts to tighten land approval and lending. In the first three months, Chinese banks consumed roughly half of the lending target for the whole year, adding 1.26 trillion yuan of loans, up 13.98 percent from a year ago.
The State Council, China's Cabinet, made a decision, at an executive meeting chaired by Premier Wen Jiabao last Friday, to move to avert a possible economic overheating by tightening controls on investment and money supply, but detailed plans have yet to be hammered out.
The growth of imports picked up tangibly, surging 24.8 percent in the quarter to 174 billion U.S. dollars, or a year-on-year rise of 12.6 percentage points.
The United States has been complaining about its huge trade deficits with China, contending that China's currency, the yuan, is artificially low, a factor in favor of Chinese exporters at the expense of American manufacturers.
In response to a journalist's question, Zheng said the U.S. deficit problem cannot be simply resorted to a yuan revaluation.
"In the short run, the exchange rate can play a minor role (in reducing U.S. deficits), but the key lies in lowering production costs and raising savings rates in the long run," he said.
China already revalued its currency by 2 percent last July, and the yuan has since appreciated an additional 1 percent, which the U.S. says is still too small.
President Hu Jintao is on a state visit to the United States. Officials from both sides have said talks would include trade and currency issues.
Earlier this month, a Chinese business delegation in the United States led by Vice-Premier Wu Yi pledged to purchase multi-billions of dollars worth of U.S.-made commodities including Boeing aircraft.
China's economy has grown at an around 10 percent clip for each of the past three years.