Chinese GDP was up an annual 11.1 per cent in the first quarter — despite a series of measures adopted to slow growth — fuelling speculation of a further tightening to come that sent other markets tumbling.

GDP was up 11.1 per cent to 5.0287 trillion yuan (£325 billion) in the first quarter of the year, compared with 10.4 per cent in the final quarter of last year, according to a report released yesterday by the —National Bureau of Statistics (NBS). The People’s Bank of China had forecast first-quarter GDP growth of 10.2 per cent. Some foreign economists said that the growth was driven by strong investment and booming exports, adding that the high GDP and CPI figures released yesterday signalled further tightening measures this month.

However, Andy Rothman, a strategist for CLSA Asia-Pacific Markets in Shanghai, said that the growth did not signify an overheating of the economy or the advent of additional government measures. Mr Rothman suggested ignoring official GDP figures, arguing that “Beijing is stuck with working from the [too high] political fiction they’ve been issuing for the past few years”. He said that the economy was picking up, but after three years of slowing.

“By our calculations, growth is accelerating a bit from a rate of 8 to 9 per cent last year, rather than [from] double-digit figures,” he said. “This will make the Communist Party leadership happy — it’s hard to create a ‘harmonious society’ without strong growth and job creation.” He predicted more of the “token tightening” that was implemented during the past year, with one small interest rate rise and a few more increases in bank reserve rations to come. “But these are designed to raise the cost of capital to a more rational level,” he said.

Mr Rothman said that the macroeconomic impact of these measures would be the same as in the recent past; that is, “not much”.

The NBS reported that the consumer price index rose 2.7 per cent year on year in the first quarter, compared with an increase of 1.2 per cent for the same period last year. Mr Rothman noted that most of the increase in CPI had come from food, which, he said, was likely to be temporary. Food prices were up by 6.2 per cent in the first quarter, meaning that nonfood CPI growth was only 1.2 per cent, against an overall CPI growth rate of 2.7 per cent for the same period.

Investors had been awaiting anxiously the release of China’s first-quarter GDP, speculating that a rise would result in further tightening measures, and markets duly fell throughout the Asia-Pacific region.

The blue-chip Nikkei 225 stock average in Japan closed 295.36 points, or 1.67 per cent, softer at 17,371.97, off a low of 17,219.73. Hong Kong and Seoul suffered their biggest falls in more than a month and shares in China slumped nearly 5 per cent, their biggest decline since February 27, when a 9 per cent drop sparked a global sell-off.

Mr Rothman said that there was little to worry about because the overall picture was positive. “Equity markets may be rattled by fears that the Government will respond to apparent overheating with tightening measures,” he said, “but those jitters aren’t likely to last for long.”

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