China's economy slowed in the second quarter as the government steered monetary and fiscal policy back to normal after a record credit surge last year to counter the global crisis.
Annual gross domestic product growth moderated to 10.3 percent from 11.9 percent in the first quarter, the National Bureau of Statistics (NBS) said on Thursday. The reading was slightly below market forecasts of 10.5 percent growth.
Inflation cooled to 2.9 percent in June, the statistics bureau also reported in Beijing today. Industrial output rose a less-than-estimated 13.7 percent.
Economists expect no dramatic policy response to Thursday's data. The government has engineered the slowdown -- markets feared overheating earlier this year -- and Premier Wen Jiabao has said the economy is going in the expected direction.
"The GDP and other activity data are basically in line with expectations, and consistent with our view that China's recovery is slowing from the fast pace set in the first quarter but remains relatively solid so far," said Brian Jackson, strategist at Royal bank of Canada in Hong Kong.
Factory growth slowed to 13.7 percent in the year to June, below forecasts for 15.3 percent and May's 16.5 percent growth.
"The good news is the economy is holding up. The bad news is investment is coming down, hence demand for commodities will fall," said Dong Tao, chief non-Japan Asia economist for Credit Suisse in Hong Kong.
The Shanghai stock market edged up 0.5 percent and stocks in Asia-Pacific outside Japan pared early losses and were broadly steady in a sign of relief that the data brought no major negative surprises.
China's GDP grew 11.1 percent year-on-year in the first half of this year to 17.28 trillion yuan ($2.55 trillion). Consumer price index (CPI), a main gauge of inflation, increased by 2.6 percent in the first half of this year from a year earlier, the National Bureau of Statistics (NBS) announced Thursday.
Unlike many of its Asian peers, most recently Thailand on Wednesday, China has not raised interest rates this year.
But year-on-year growth in the stock of outstanding yuan loans slowed to 18.2 percent at the end of June from 33.8 percent as recently as November. Growth in the M2 measure of money supply moderated to 18.5 percent from 29.7 percent over the same period.
Consumer price inflation fell to 2.9 percent in the year to June from 3.1 percent in May, below forecasts of a 3.3 percent rise. Consumption was resilient, even though annual retail sales growth eased to 18.3 percent in June from 18.7 percent in May.
Export growth has also remained robust, but the tightening measures for the housing market are now having an impact on infrastructure and real-estate spending.
Year-to-date investment in fixed-assets such as flats and factories slowed, growing 25.5 percent against a year ago period after a 25.9 percent rise in May.
A Reuters poll of economists released on Wednesday pointed to full-year growth of 10 percent in 2010, slowing to 9.0 percent in 2011.
