The growth rate held steady from last year, falling by just 0.2 percentage points from the same period in 2004, the National Bureau of Statistics said on Wednesday.

 

Total gross domestic product between January and June reached $811 billion (6.7 trillion yuan), it added.

 

Supporting the fast growth was a resurgence in investment in construction and factory equipment, which rose 28.8% in June over a year earlier, compared with year-on-year increases of 28.2% in May and 26.5% in April.

 

The statistics bureau gave a somewhat conflicted interpretation of the growth figures, saying the economy was developing in the "expected direction of macro-regulation and control", and that "the overall situation is good", yet describing the surging gains in capital investment as "unreasonable".

 

Sustainable growth

 

Regulators have been tightening credit and limiting lending for investments in property development and a number of booming industries, hoping to relieve strains on energy supplies and transport and achieve a more sustainable growth level.

 

However, spending at the local level has remained strong.

 

Lending has been limited for
investments in property

Although the economy shows little sign of slowing down, the monthly figures can be deceptive, as domestic economists believe data earlier in the year underestimated the pace of growth, said Chen Xingdong, an economist with BNP Paribas Peregrine in Beijing.

 

China's economic data is notorious for its inaccuracy, and local authorities often adjust their reporting for political purposes.

 

"Don't take the monthly figures too seriously," Chen said.

 

Slower growth

 

Growth in nominal terms, not adjusted for inflation, has slowed more significantly. And fixed asset investment, which represents actual spending, is not an indicator for future growth, Chen noted.

 

The Chinese government has set its growth target for 2005 at between 8% and 8.5%.

 

Although growth has remained far above that level, inflation - which had surged last year - appears to have decelerated.

 

The consumer price index (CPI) hit a seven-year peak of 5.3% in August 2004, sparking concerns. But the index rose only 2.3% in the first half of this year, down from 3.6% growth in the first half of 2004, the government reported.

 

Excess production

 

A bumper grain harvest last year has helped stem shortages that had pushed up the index, which is strongly weighted towards food costs, sharply higher. 

 

Excess production of clothing has
helped keep prices in check

Excess production capacity for many consumer goods, such as clothing, appliances and cars, has also helped keep prices in check.

 

"The growth rate of consumer prices slowed down steadily with the monthly CPI growth standing at 1.8%, 1.8% and 1.6%, respectively, in April, May and June," spokesman for the statistics bureau Zheng Jingping said in Beijing.

 

Producer prices for industrial products rose 5.6% in June from a year earlier, while purchasing prices for raw materials such as fuel and power rose by 9.9% year-on-year, Zheng said.