The National Bureau of Statistics released China's economic statistics for the first quarter on Tuesday. They indicate that the recovery momentum is being consolidated.

Some observers, citing the weak consumer price index and an obvious credit expansion, concluded that the economic restart should be swifter and the pro-recovery policies should be more powerful than their current levels, and some still think that it will only be a matter of time for the Chinese economy to enter deflation if the global economic recession and insufficient domestic demand are not addressed in time.

But it should be borne in mind that China is still in the early stages of the recovery. Prices and employment lag behind the overall growth rate of the economy.

China's GDP grew by 4.5 percent year-on-year, a rate faster than expected, and a glance at more data shows that what the Chinese economy is experiencing is not deflation, but just some recovery pains.

The total retail sales of consumer goods rose 5.8 percent in the first quarter from a year earlier, compared with a 2.7 percent decline in the fourth quarter last year. And investment in fixed assets in the first three months grew by 5.1 percent year-on-year, the same as the whole of last year. Investment in infrastructure and manufacturing grew by 8.8 percent and 7 percent respectively. It is particularly good to see that the contribution of consumption to economic growth reached 66.6 percent in the first quarter. All these show that demand is recovering as well.

China's economic recovery should be orderly and should not depend on the injection of credit, which might yield immediate effects but would not be good in the long run as easy money distorts the pricing mechanism and economic structure.

Another factor that must be taken into account when looking at the first quarter data is that China's manufacturing sector was still in its destocking cycle thus offsetting the growth momentum brought by the apparent recovery of the service sector. But that process is coming to its end. China's exports and imports fell 7 percent in January, rose 8 percent in February, and accelerated to 15.5 percent in March. With the global demand slowly recovering, China's manufacturing industry will gradually regain full steam.

21ST CENTURY BUSINESS HERALD