The country's gross domestic product (GDP) is expected to grow by 10.8 percent in the second quarter of this year, though the expansion of the trade surplus should slow during the period, according to the State Information Center.

The consumer price index (CPI) is expected to reach 3 percent in the second quarter of this year, said the center in a report published in the Chinese press yesterday. The State Information Center is a research body under the National Development and Reform Commission.

The center also predicted that the country's GDP would grow by 11 percent in the first half of this year.

Related readings: China stocks at new high, yuan breaks key barrier China's main stock index surged 2.83 percent to a fresh all-time high Tuesday as the yuan broke the 7.70 barrier for the first time. China's economy to grow steadily: economist Service sector to grow 20% Private sector payroll rises by 10% China's boom will continue Olympic games boosts Greek economy - Minister

Driven by strong investment and trade growth, China's economy grew by 11.1 percent in the first quarter.

The center said the economy's consistently strong growth in the second quarter would be backed up by brisk growth in consumer spending and investment despite the tightening measures that have been put in place.

The report forecast that overall investment would increase by 24 percent year on year in the second quarter, while investment in the real estate sector would pick up from 26.9 percent in the first three months to 27 percent in the second quarter.

State controls on investment have helped reduce the number and scale of newly launched projects in recent months, but existing construction projects that started before the macroeconomic regulations took effect will continue to boost investment growth in the second quarter, the report said.

The report said the growth of the country's trade surplus would slow significantly on the back of a dramatic increase in the surplus in the second quarter of last year, the renminbi revaluation, a slowdown in the US and local efforts to cut China's export rebates.

The report forecast that export growth would slow from 27.8 percent in the first quarter to 22.6 percent in the second, while imports would edge up from 18.2 percent in the first three months to 19.7 percent in the second quarter.

As a result, the center said, the trade surplus would hit $52.4 billion in the second quarter and $98.8 billion in the first half. That means a year-on-year growth rate of 38.8 percent in the second quarter, about 24 percentage points lower than in the same period a year ago.

The CPI is expected to grow by 2.9 percent in the first half of this year, the center said. It grew by 2.7 percent in the first quarter, and 3.3 percent in March, surpassing the central bank's 3 percent warning level.

The upward trend in the CPI has been driven by a pickup in demand as a result of strong consumption, exports and excessive liquidity.

Grain prices, which have been rising regularly since last year, will continue to rise until autumn, the report warned, because grain production could stay flat.

Rising real estate prices are another factor contributing to the increase in the CPI. The situation could lead to higher rents, which is one part of the CPI, the report said.

(China Daily 05/09/2007 page3)