China's economy should recover its growth trajectory after two weeks of self-imposed slowdown during the Olympics, Rio Tinto said yesterday.

The world's second-largest mining group said that it expected Chinese economic growth to remain strong this year despite a hiatus over the past month.

Chinese officials shut down large industries around Beijing and neighbouring cities during the Olympic period amid concern about pollution levels.

The combination of weakening Western economies and a sudden drop in Chinese economic activity had led to concerns that the commodity boom had ended. However, Rio said that it expected China to recover from its Olympics hangover and grow at about 10 per cent this year and 9 per cent next year.

Tom Albanese, chief executive of Rio Tinto, said: “We do not see a country-wide slowdown and expect the Chinese economy to pick up post-Olympics.”

Mr Albanese added that China would see some slowdown due to falling demand for its exports in the West but domestic consumption was now a far more important factor in continued Chinese growth.

Rio believes that the fastest growth areas in China will move from the eastern cities such as Beijing, Tianjin and Shanghai to inland provinces. “There are provinces with populations larger than most European countries that are only now beginning to see rapid development,” Mr Albanese said.

His comments came as Rio revealed a 55 per cent increase in its underlying earnings to $5.5 billion during the first six months of this year.

Rio said it expected an even stronger second half after an agreement with Chinese, Japanese and Korean steel makers for an 86 per cent increase in the price of iron ore.

Charles Cooper, mining analyst at Evolution Securities, said: “The main driver for Rio in our opinion is from bulk commodities which are largely tied to China's economic growth, and according to Rio it expects Chinese demand to recover after the Olympics.”

Rio's earnings from its iron ore division rose 162 per cent in the first half to $2.8 billion. Mr Albanese said that Rio's continued strong growth was evidence that a $130 billion bid by rival BHP Billiton undervalued the company.

Rio increased its interim dividend by 31 per cent to 68 cents a share and committed itself to at least a 20 per cent full-year increase this year and next.

The first-half results included the first full contribution from Alcan, the aluminium producer that Rio bought for $38 billion last year. Mr Albanese said that synergies between the two companies would rise to $1.1 billion a year from a previously estimated $600 million.

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