(asia.news.yahoo.com, April 17, 2007)China's economy probably gathered pace in the first quarter, partly on the back of resurgent loan growth and underscoring the need for Beijing to take further tightening steps in the months ahead.

The median forecast of 12 economists polled by Reuters was for gross domestic product to have grown by 11.0 percent from a year earlier in the January-March period.

That would be a pick-up from a 10.4 percent annual growth rate in the fourth quarter and 10.6 percent in the third. GDP expanded by 11.5 percent from a year earlier between April-June last year.

The National Bureau of Statistics is due to issue data for March and the first quarter on Thursday at 0200 GMT.

"I don't think GDP growth will trend lower in the first quarter as it did in the second half of 2006," said Lin Songli, an analyst with Guosen Securities in Beijing.

"Loan growth, the trade surplus and consumption have all expanded very rapidly in the first three months," he said.

But ongoing efforts by the authorities to rein in excess liquidity by further raising interest rates or the amount of cash that banks have to hold in reserve rather than lend out would probably temper economic growth as the year goes on, analysts said.

China has already forced banks to tie up more of their deposits in reserves 6 times and raised benchmark interest rates 3 times over the past year, but the impact has been limited.

Average money supply growth topped Beijing's 2007 target of 16 percent in the first 3 months as the country's trade surplus -- which doubled from a year earlier to $46.4 billion in the first quarter -- generated more liquidity in the banking system.

"I think all the steps which the central bank has taken and will continue to take will eventually have more of an impact in the second half of the year," said Lin.

Following are the forecasts for Thursday's data. (percentage change from a year earlier):

                      FORECASTS             EARLIER DATA
 Q1 2007           Median    Low   High     Q406   Q306   Q206
 GDP                 11.0   10.2   11.4     10.4   10.6   11.5
 March 2007        Median    Low   High      Feb    Jan    Dec
 CPI                  2.8    2.1    3.2      2.7    2.2    2.8
 PPI                  3.0    2.5    3.5      2.6    3.3    3.1
 Industry output     17.0   14.1   18.2     18.5*   n/a   14.7
 Urban investment~   23.4   21.5   25.0     23.4*   n/a   24.5
 Retail sales        14.5   13.8   14.7     14.7*   n/a   14.6
* These figures are for January and February combined.
 
* Not all economists provided forecasts for each indicator; 13 economists provided forecasts for CPI.

~ Fixed-asset investment in urban areas, year to date

EYEING INFLATION

Attention is likely to centre on China's consumer price inflation, which could rise by an annual 2.8 percent in March as it did in December.

Lofty food and grain prices have largely driven inflation higher, prompting extra vigilance for broad-based price gains.

Expected government moves to loosen controls on utility and energy prices could fuel inflationary pressures further, analysts say.

Mingchun Sun of Lehman Brothers expects inflation to peak at around 3 percent in July before potentially dipping below 2 percent in December, taking the full-year rate to 2.5 percent from 1.5 percent in 2006.

That would still be within the comfort zone of the government, which is targeting inflation of within 3 percent in 2007.

Other highlights will include industrial output, which probably grew in March by an annual 17 percent and at its fastest rate since June, when it rose 19.5 percent on the year.

Widely-watched investment growth likely stabilised in March, having eased steadily over much of last year.

For Jun Ma of Deutsche Bank, China's main economic risks lie in the potential for destabilising asset bubbles.

"The key concern for the moment is not on the real economy overheating, it is on asset bubbles. So this round of policy tightening is going to be very different from 2004 and 2006."

(Additional reporting by Langi Chiang, Jason Subler and Zhou Xin)