Jan 20 - China posts double-digit growth in 2010, as Q4 defied slowdown expectations; inflation eases but seen rising again due to harsh winter and Chinese New Year demand. Arnold Gay reports.
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China finished 2010 with a bang, with growth soaring past expectations, but inflation is still higher-than-expected.
Defying predictions of a slowdown, 4th-quarter growth came in at 9.8 percent, bringing full year growth to a double digit 10.3 percent
Other important December data, like factory output and investment, suggested an economy free from overheating.
Inflation eased in December, but was still above estimates.
China's statistics bureau chief, Ma Jiantang, acknowledges upward price pressures remain.
(SOUNDBITE)(Mandarin) CHINA'S NATIONAL STATISTICS BUREAU AGENCY CHIEF MA JIANTANG SAYING:
"Despite our success in keeping the overall price level stable, we need, in 2011, to take the task of controlling price very seriously because there is a pressure for further increase of CPI. On the other hand we also have good conditions for regulating the price level."
Meat and vegetable prices have risen in recent weeks due to a harsh winter, and higher demand from an earlier Chinese New Year in 2011 than last year.
This suggests the pull-back in prices last month would be temporary, and inflation would continue to be a challenge for Beijing.
Food cost is the main driver of Chinese inflation.
For now, residents appear to be taking higher prices in stride.
(SOUNDBITE) (Mandarin) FRUIT BUYER MS. HAO SAYING:
"I don't think there's any difference [in inflation control] but I guess you still have to eat what you want and buy what you need. In any case, buying fruit here at the wholesale market is still much cheaper than the commercial stores, you get even less for your money there."
Despite an advance preview of the economic data by local media, the Shanghai composite still lost over 1.3 percent by midday, as the market viewed the numbers as bolstering the case for tightening.
China has raised banks' required reserves seven times since the start of last year to 19.5 percent, with the most recent increase only last week.
But interest rates have only been raised twice during the same period, and some analysts warn of more forceful moves ahead.
The government is also debating credit curbs, with recent reports pointing to a lower cap on bank lending than some investors expect.
China's central bank has nudged the yuan higher against the dollar over the past week, but that is seen as more politically motivated than inflation inspired, as President Hu Jintao visits the U.S.
Chinese consumer price inflation is estimated at 4.3 percent this year, above Beijing's target of capping it at 4 percent.
Economic growth is expected to slow to 9.3 percent.
Arnold Gay, Reuters
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