BEIJING, June 27 -- The Chinese economy steamed ahead in the first half of the year.

    After posting 10.3 per cent growth in the first quarter, gross domestic product (GDP) is expected to expand at the same pace in the second quarter, according to a report by the People's Bank of China's research unit.

    But it is likely to slip a bit in the second half as the effects of the government's tightening measures over the past few months kick in.

    The People's Bank of China jacked up the lending rate and raised the ratio of funds commercial banks are required to deposit with the central bank.

    The central government has also announced a package of policies to cool down the red-hot real estate market.

    These measures are aimed at dampening investment and loan growth, which have been driven mainly by the property market.

    In light of economic policy-makers' increasing promptness in applying macroeconomic management, new adjustment measures should not be ruled out if high investment growth persists.

    Local governments, which are seen as key sponsors of rapid investment growth in many areas, have an important role to play, and should ensure that detrimental factors are effectively controlled.

    New investment areas must be identified to compensate for slower investment growth in the property market; and a steep decline should be avoided.

    There is much room for healthy investment. The process of urbanization and the development of western and central parts of the country all mean great investment opportunities. In the property sector, there is still enormous demand for low-cost houses.

    Apart from the blistering speed of investment growth, other aspects of the economy are in good shape: consumption growth is stable; price rises are mild; and enterprises' profitability is improving.

    The external environment is also favourable with the robust global economy boding well for China's trade sector.

    While addressing short-term problems, the country should continue to push ahead with reforms to ensure long-term growth prospects.

    Reforms that support consumption growth deserve particular attention because an economy as large as China can be sustained only by strong domestic growth. Consumption growth, though stable, has never been at the forefront in buoying the economy.

    It is agreed that farmers' low incomes, incomplete social safety net, and high education and healthcare costs are among the obstacles hindering consumption growth there is an urgent need for reform in these areas.

(Source: China Daily)