Sizzling Chinese economy spurs worries over inflation

first_img160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! Stocks later stabilized in the United States – unlike the panic selling on Feb. 27 that sent the Dow Jones industrial average plunging 416 points in the worst one-day rout since the Sept. 11 attacks. But the “China effect” on investors around the world remains palpable, due in large part to just how important trade with China has become for most nations. On Thursday, the State Council in China vowed that it would take steps to keep the economy from overheating. It has said the same thing several times in the past year, to little avail. The economy keeps exceeding growth expectations even though interest rates have been increased three times in the last year and curbs have been imposed on investments in real estate, the auto industry and other fields. The latest evidence that the restrictions haven’t taken hold: Beijing reported Thursday that fixed-asset investment countrywide grew a stunning 23.7 percent during March. But the real shocker for investors was the news that the consumer price index in March rose 3.3 percent, its highest since hitting 3.9 percent in February 2005. China has said it wants to keep inflation under 3 percent for the whole year after it increased 1.5 percent in 2006. BEIJING – The signs of a surging economy are everywhere: flashy luxury cars, glitzy shopping malls, expensive restaurants and construction cranes in many neighborhoods. For most Chinese, this is a good thing. It means more jobs, higher incomes and rising affluence. But China’s leaders, fearful of accelerating inflation and the risk that all this investment could collapse in a debt crisis if borrowers go bankrupt, are trying to apply the brakes. How well they succeed is taking on an increasing global importance, as a slide in stock prices in Asia and then Europe on Thursday demonstrated. The reaction came after Beijing reported its economy expanded in the first quarter a sizzling 11.1 percent from the same quarter a year ago and that inflation was the highest in two years. last_img

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