Latest News

GUANGZHOU — After a sharp economic slowdown through much of last year, China's economy is growing again — but not at its previous double-digit pace, and with signs that inflation might become a problem again.

Shops have been crowded this weekend, construction sites show renewed activity and factories are hiring as exports and domestic demand recover — trends all underlined by government data released over the past several days.

Further data to be released Friday and Saturday — including monthly, quarterly and annual figures for industrial production, fixed-asset investment, retail sales and overall economic output — are also expected to show that the Chinese economy, the world's second-largest, after that of the United States, is expanding once again.

Many shopkeepers are noticing an increase in retail sales. Among them is Liu Licai, a merchant in southern China who sells curtains and other household goods. Although some industries, like auto manufacturing, still suffer from bloated inventories, retailers like Ms. Liu are finding their shelves too empty and are starting to place more orders with suppliers, keeping factories busy.

"Business has gone up by more than 10 percent in the last several months," Ms. Liu said during a brief lull on an otherwise busy day.

Yet the pace of China's expansion may not be fast enough to do much for the rest of the world. China's imports are growing less than half as fast as its exports, making it hard for China to become the locomotive to pull the global economy out of its half-decade funk. And overall growth is not rebounding to previous levels.

Until last year, the Chinese government set as a goal 8 percent annual growth and the economy frequently delivered several percentage points more than that. Then last March, the government pared the goal to 7.5 percent, and actual growth seems likely to be little higher.

"The potential growth rate of the economy has come down," Stephen Green, a China economist in the Hong Kong offices of Standard Chartered, said Sunday. "You don't have to be in the double digits to get inflation."

Prices rose faster in December, according to government data released Friday. Consumer prices rose 2.5 percent from the level of a year earlier, their fastest pace since May.

Economists inside and outside China say the true rate of inflation is as much as double the official rate, because of methodological problems in the way China calculates inflation.

Mr. Green and other Western economists warned Friday and over the weekend that officially measured inflation at the consumer level could reach 5 percent by the fourth quarter and lead to an increase in interest rates by China's central bank.

Producer prices are still declining, but at a slower pace. They were down 1.9 percent in December from a year earlier, the smallest drop since last May.

Early in an economic recovery, rising prices tend to be a sign that the economy may not have much unused capacity that can be brought into production quickly. Yet Wen Senrong, the sales manager of the Flying Gift Bag store in Guangzhou, said that she was already seeing prices rise, with increases for rent, materials and labor.

"Our lease was renewed recently and our rent went up by a double-digit percentage — I feel like I am working for the landlord," she said.

Tang Chun, the owner of a factory that makes picture frames in Guangzhou, complained of rising costs for the full range of supplies that she buys, including aluminum, acrylic and glass. But department store buyers lack the confidence to accept higher prices, fearing that they will not be able to pass them on to retail customers, she said.

"Every possible cost is going up, including raw material costs and my rent, but I can't raise prices; it's all coming out of my profit margins," Ms. Tang said.