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China's economic growth surges

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A worker changes the price board at a petrol station in in China's Sichuan province

A worker changes the price board at a petrol station in in China's Sichuan province

A worker changes the price board at a petrol station in in China's Sichuan province

China's economic growth surged to 11.9% in the first quarter but inflation was lower than expected, easing pressure on Beijing to hike interest rates and slow the third-largest economy's rebound from the global slump.

Consumer prices rose 2.2% compared with a year earlier, the National Bureau of Statistics said on Thursday, well below the government's ceiling of 3% for the year.

The data suggested Chinese leaders are succeeding in their effort to keep stimulus-fueled growth high while preventing inflation from spiking up. Analysts were closely watching Thursday's data to see whether interest rate hikes or more drastic action was required to prevent overheating.

Still, the government called for caution.

"The current economic situation is still extremely complex and we still face many problems in the process of recovery," the statistics bureau spokesman, Li Xiaochao, told reporters in Beijing.

He said the government will maintain pro-stimulus policies but be "more flexible and targeted, according to the situation."

The latest data showed China is on the verge of overtaking Japan as the second-largest economy behind the United States.

The surge in economic expansion was up from just over 6% in the same quarter a year ago and 10.7% in the final quarter of 2009. It was supported by a 19.6% rise in industrial output over a year earlier and a nearly 26% rise in investment in factories and other fixed assets.

Chinese leaders face a challenge in checking inflation and curbing reckless, stimulus-fueled spending on unneeded factories and other assets that could leave a mountain of bad debts.

Beijing raised fuel prices on Wednesday in a show of confidence about its ability to keep inflation in check.

PA