The latest GDP and consumer price inflation figures confirm the economy is slowing more slowly than expected, which led to the surprise rise in interest rates earlier this week. The economy grew at 9.6% in the third quarter compared to the same period a year earlier. That is the slowest year-on-year quarterly growth of the year as the government continues to mop up after its stimulus package, but still faster than expected. Consumer prices rose by 3.6% in September compared to the same month a year earlier, the fastest increase in two years and well above the government’s 3% target rate. More expensive food, in the wake of the year’s abnormally bad weather, and housing were the reason.
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At an IMF conference on Monday, central bank governor Zhou Xiaochuan (right) said China faces increasing risks from excessive liquidity, inflation, asset bubbles and non-performing loans in the wake of the global financial crisis. While those may all be true, the latest economic data and the firmness of domestic demand and investment suggest the economy has weathered the crisis and is now getting back to normal. While more interest-rate rises and increases in banks’ reserve-ratio requirements are likely, they will be mainly intended to deflate the persistent property bubble.