China's slowing growth could hit India's exports.

China's moves to bring back in control its rapidly over-heating economy appear to have paid dividends, with the economy showing signs of slowing in the second quarter of this year according to data released on Thursday.

China's economy grew 10.3 per cent in the second quarter, down from 11.9 per cent in the first and 10.7 per cent in the last quarter of 2009, announced the National Bureau of Statistics (NBS).

The economy's slowing-down follows a number of steps taken by the government in recent months, including phasing out the $586-billion stimulus spending, tightening curbs on lending and bringing in check spiralling property prices.

Thursday's numbers were welcomed by Chinese officials but are expected to cause concerns globally, said economists, particularly because slowing industrial output could impact China's appetite for imports of raw materials.

“A slowdown in the growth rate will benefit the economy because it will prevent it from growing too fast and being overheated,” said Sheng Laiyun, a spokesman for the NBS.

Analysts said they expected growth to continue to slow through the rest of the year. Tom Orlik, an economist in Beijing with Stone & McCarthy Research Associates, said the government would now focus on preserving growth, having brought inflation under control. Growth would slow, but would not “collapse”.

The Consumer Price Index increased 2.6 per cent in the first half of the year. Inflation in June dipped to 2.9 per cent, down from 3.1 per cent in May.

“China's inflation in the first half was mild and within the range of management,” said Mr. Shen, referring to the government's three per cent target.

Of concern globally will be China's slowing industrial output, which is likely to hit China's imports. Industrial output grew 13.7 per cent in June, down from 16.5 per cent in May.

Fixed asset investment also slowed.

Significantly for India, iron ore imports are expected to fall through the rest of the year, said economists, potentially hitting the country's biggest export to China and further widening a record trade imbalance.

The first half of this year has seen Indian exports soar by 80 per cent, largely driven by iron ore and slag, which accounted for 63 per cent of total exports.

But recent months have seen signs of falling demand for iron ore as a result of slowing industrial output, with some of China's biggest steelmakers announcing price-cuts in recent weeks.

Source : The Hindu