15/04/2010 - 15:33

China's economy grows 11.9%

15/04/2010 - 15:33

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Australia is expected to benefit from China's continuing economic growth, which grew at its fastest rate in almost three years during the March quarter.

Australia is expected to benefit from China's continuing economic growth, which grew at its fastest rate in almost three years during the March quarter.

China today reported that its economy grew at an 11.9 per cent annual rate in the three months to the end of March, up from 10.7 per cent in the December quarter.

It is the fasted pace of economic growth since the June quarter in 2007.

CommSec chief economist Craig James said at face value, China's economic growth appeared to be unsustainable, however the activity was increasing from a low base.

Nearly 58 per cent of GDP growth in the March quarter was investment, consumption make up 52 per cent while exports made a negative contribution to growth.

Retail sales during the period grew at an 18 per cent annual rate in March, the fastest rate in 15 months, while inflation eased from 16-month highs to 2.4 per cent.

Industrial production was up 18.1 per cent on a year earlier in March, investment was up 26.4 per cent while property prices in 70 cities grew 11.7 per cent.

"It is very much in Australia's interests that China grows at a solid, but sustainable pace," Mr James said.

"No one wants a boom/bust situation. And a solid pace of growth clearly benefits a raft of Australian companies, particularly in mining, construction, transport and engineering sectors.

"To maintain sustainable growth, China will need to tighten policy - lift bank reserve requirements, raise interest rates and allow the currency to strengthen.

"Investors shouldn't fear this process."

China recently overtook Japan as Australia's largest trading partner and the top export destination.

"It's important to remember that China is still in the early days of its industrialisation," Mr James said.

"For the next five years, retail spending, production and investment will grow at double-digit rates, dragging in resources from places like Australia.

"Australia will rise on the coat tails of China as it did in the past with Japan."

 

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