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China’s economy grows 9.7 per cent amidst inflation tide

China's economy still growing at a rate of almost 10 per cent - but consumer prices are up too.

China's first term growth exceeded expectations, reaching a year-on-year 9.7 per cent increase in the period between January and March.

However, growth came with a significant increase in consumer prices. The year-on-year inflation rate for March was 5.4 per cent, following February's 4.9 per cent.

The main cause for this phenomenon lies in the sharp increase in food prices, which have gone up 11.7 per cent in 2011. Other factors included a rise in demand for the retail sector, which rose 16.3 per cent from the 2010 rate, and a 10.3 per cent increase in oil demand -- which is pushing global prices upwards. The housing sector has also seen a sharp rise in prices.

Government efforts to curtail these hikes have proved insufficient, despite four interest rate rises in the past six months. The Chinese central bank has also increased the amount of capital local banks need to possess in order to lend, a move which analysts expect the central bank to repeat.

Speaking at the Asian equivalent of the World Economic Forum in Boao last Friday, the Chinese President, Hu Jintao, admitted the country's growth was still unbalanced and promised to boost domestic consumption.