China's economy soared by 10.2 percent in the first quarter, fueled by strong investment, a government spokesman said Thursday, dismissing fears that the economy might be overheating.
Gross domestic product, the broadest measure of goods and services output, reached 4.33 trillion yuan (540 billion U.S. dollars), said Zheng Jingping, of the National Bureau of Statistics.
"The growth seems to be on the fast side, but I want to say such a rate still falls in the range of the potential economic growth. It remains basically normal, though touching the upper limit," he said.
"It should arouse concern, and actually has caught our attention," Zheng added.
Wang Xiaoguang, a macro-economics research fellow with the National Development and Reform Commission, said he believed the economy was largely being driven by hefty investment.
Investment in roads, factory equipment and other fixed assets totaled 1.39 trillion yuan, growing a sharp 27.7 percent, or an increase of 4.9 percentage points year on year.
Investment in urban areas climbed 29.8 percent to 1.16 trillion yuan, while that in rural areas came to 230 billion yuan, up 18.1 percent. China is launching a massive "socialist new countryside" campaign to boost rural development, which had been left behind in the country's reform and opening-up drive over the past two decades.
Wang said local government planned too many big projects in 2006, the first year in China's new 11th five-year blueprint.
He called for greater government efforts to tighten land approvals 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 in loans, up 13.98 percent from a year ago.
The State Council outlined moves at an executive meeting chaired by Premier Wen Jiabao last Friday to avert possible overheating by tightening controls on fixed asset investments and money supply, but detailed plans have yet to be hammered out.
Of the first-quarter GDP, primary industry recorded 320 billion yuan in value added, up 4.6 percent; secondary industry 2.16 trillion yuan, up 12.5 percent; and tertiary industry 1.85 trillion yuan, up 8.7 percent.(more)
Trade, currency on the agenda
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 deficit with China, contending that China's currency, the yuan, remains artificially low, favoring Chinese exporters at the expense of U.S. manufacturers.
However, Zheng said the U.S. deficit problem would not be resolved by a simple revaluation.
"In the short run, the exchange rate can play a minor role (in reducing U.S. deficits), but in the long-run the key lies in lowering production costs and raising savings rates," he said.
China revalued its currency by 2 percent last July, and scrapped the yuan's peg to the U.S. dollar, instead linking it to a basket of currencies for a managed float. The yuan has since appreciated an additional 1 percent, but the U.S. says the increase is too small.
Zheng argued China's exchange rate operation was "sound."
President Hu Jintao is on a state visit to the United States. Officials from both sides have said talks with the Bush administration 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 recorded a surplus of 23.3 billion dollars in the first quarter as exports grew 26.6 percent to 197.3 billion dollars, down 8.3 percentage points from a year earlier.
Urban dwellers reaped a 10.8 percent increase in disposable income, 2.2 percentage points higher year on year, while the growth in farmers' income fell 0.4 percentage points to 11.5 percent. Analysts say the rich-poor gap has yet to be closed.
Zheng acknowledged oil price hikes would have a definite impact on China's economy, especially on some energy-guzzling factories and refineries, as nearly 40 percent of the oil China consumed was imported.
But he said the influence would be "limited," as coal still represented 60 to 70 percent of China's energy consumption. In the meantime, the country's abundant natural gas resources could be used as substitutes to some extent.
China's economy has grown at 10 percent clip for each of the past three years. The government sets an 8 percent growth for the full year, and China's newly-appointed top statistician Qiu Xiaohua has said the economy should grow 9 percent this year.