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China's economy grows nearly 12 percent

By the CNN Wire Staff
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STORY HIGHLIGHTS
  • China's economy grew 11.9 percent over a year ago, the government said
  • Marks the nation's return to double-digit growth, the highest since 2007
  • Fears remain that rising property prices could result in a bubble
RELATED TOPICS
  • China
  • Business

Beijing, China (CNN) -- China's economy revved into high gear during the first quarter of 2010, growing 11.9 percent over a year ago, a spokesman for the National Statistics Bureau said Thursday.

The nation's gross domestic product -- a broad measure of economic output -- also gained 1.2 percent from the fourth quarter of 2009.

"The momentum of national economic recovery has further expanded, which has laid a good foundation for reaching the targets set for the whole year," spokesman Li Xiaochao said.

The growth was fueled by industrial growth -- 22 percent for heavy industry and 14 percent for light industry -- and a nearly 18 percent expansion in consumer retail sales.

Another thing fueling that growth is the nation's voracious appetite for real estate -- investments in fixed assets are up nearly 26 percent this quarter. "Investment in fixed assets increased rapidly and that in real estate continued to accelerate," the National Bureau of Statistics noted in its announcement.

Many fear behind China's explosive growth, a property price bubble is growing. China's State Council on Wednesday warned about inflation and vowed to curb escalating property prices.

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The figures mark a return to double-digit economic growth for China, which saw its white-hot economy slump to merely robust in 2009. China was able to maintain moderate economic growth even as the U.S. and Japanese economies were in recession last year.

In 2007, China's gross domestic product grew at 13 percent.

Despite the explosive start to the year, Li tried to dampen expectations.

"This 11.9 percent is higher than the 8 percent target set by the National People's Congress set for the whole year but the latter half of the year will definitely face challenges because the base GDP figure of late last year is higher," Li said.

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The high levels of economic growth China has been experiencing typically result in inflationary pressures, raising prices and ultimately slowing expansion.

"China's drivers of economic growth should become more balanced as policymakers seek to transition from rapid growth to longer-term stability," said Jing Ulrich, a China equities and commodities expert with J.P. Morgan. "Higher than expected inflation could necessitate more aggressive tightening, while global trade disputes could hinder the export recovery."

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"Despite China's positive outlook, some risks remain to sustained economic recovery," Ulrich said. "Excessive tightening in the property sector could dampen home sales, which would be negative for commodities, employment and housing-related consumption."

CNN's Jo Lin Kent and Ed Payne contributed to this report