China's economic expansion eased to 10.3 per cent in the second quarter and industrial production cooled more than forecast last month, signalling a deeper second- half slowdown that may add to risks for the global economy.
The gain in gross domestic product was less than an 11.9 per cent increase in January March from a year earlier. Inflation cooled to 2.9 per cent in June, the statistics bureau also reported in Beijing today.
Industrial output rose 13.7 per cent, suggesting a diminishing risk of economic overheating and giving premier Wen Jiabao more room to scale back restrictions on bank lending or property purchases by year-end.
The Shanghai Composite Index and stocks across Asia declined as weaker growth in China added to European budget cuts and limited American job gains in clouding prospects for the world recovery.
"There's no more tightening happening in China" given the slowing expansion, said Stephen Green, head of China research for Standard Chartered Bank in Shanghai.
Policy makers may loosen some real-estate curbs and approve more infrastructure and investment projects in the fourth quarter as growth slows toward 7 per cent before picking up into 2011, he said.
Second-quarter growth was less than the median 10.5 per cent estimate in a Bloomberg News survey of 28 economists. The moderation follows the government's success in tempering credit expansion, investment spending and property speculation.
Baoshan Iron and Steel Co., the biggest publicly traded Chinese steelmaker, cut prices this week, highlighting the weakness in industrial output that Credit Suisse AG. Economist Tao Dong described as the "biggest worry" from today's numbers.
Analysts' forecasts had indicated June inflation of 3.3 per cent and industrial production growth of 15.1 per cent. In May, consumer prices rose 3.1 per cent, the fastest pace in 19 months.
Stocks in China and across Asia have retreated the past two months in part on concern that Chinese tightening measures - including guidance to banks to curb lending and tougher mortgage lending rules - may be excessive.
The government may by year-end move to bolster spending by loosening quotas limiting bank lending, according to Nomura Holdings Inc. and Morgan Stanley.
China's central bank sold three-year bills at a lower yield for the first time in six weeks today, suggesting that officials favour policies to support the economy as growth slows.
A leading economic index for China rose 0.8 percent to 145.8 in May, The Conference Board said today. The indicator signals "solid but less robust growth in the second half," said Bill Adams, a Beijing-based economist for the research organization.
China remains the fastest-growing among the world's biggest economies.
Bloomberg