BEIJING, April 16 (Xinhua) -- China's economic growth slowed to 10.6 percent in the first quarter from 11.7 percent in the same period last year, the National Bureau of Statistics (NBS) said on Wednesday.

    China had maintained steady, rapid growth so far this year, despite the worst winter here in half a century and the spreading global credit crisis, NBS spokesman Li Xiaochao said.

    The world's fourth-largest economy grew 11.9 percent in 2007, fueled by record exports and massive spending on infrastructure. It was the fifth consecutive year that its annual economic growth exceeded 10 percent.

    Song Guoqing, a professor at the China Economic Research Centerat Peking University, said that the first-quarter figure was normal and "last year's growth rate was too high to be sustainable."

    The deceleration was mainly due to the unusually severe winter weather and slowing exports, but investment growth was high and domestic consumption had remained strong since the second half of last year, he added.

    The first-quarter trade surplus fell 10.6 percent year-on-year as demand from the United States and Europe weakened.

    The growth rate of exports to the United States was 15 percentage points lower than the year-earlier period, while that of exports to Europe was down 10.3 percentage points.

    Zhang Liqun, a macroeconomist with the Development Research Center of the State Council (cabinet), said the appreciation of the Chinese currency and the global credit woes stemming from the U.S. subprime crisis dragged down demand for China's exports, which contributed about a third of its economic growth last year.

    The local currency, or the yuan, has gained about 4 percent so far this year, or about 18 percent from the level of 8.2765 yuan per U.S. dollar where it stood before China ended the peg to the greenback in July 2005.

    "Rising labor costs in China and efforts to reduce emissions and save energy are also among the reasons for slowing exports," Zhang said.

    Industrial production in the first quarter rose 16.4 percent from a year earlier, the statistical agency said. The increase was1.9 percentage points lower than in the same period of 2007.

    Investment in fixed assets, a category that covers everything from housing to new factory equipment, surged 24.6 percent, which was 0.9 percentage points higher than a year earlier.

    Despite the central government's efforts to cool the economy, including six interest rate hikes in 2007, investment might grow faster this year as government officials at all levels took up their new five-year posts, said Zhang Yansheng, head of the International Economic Research Institute under the National Development and Reform Commission.

    Such a rebound, together with higher tourism revenues from the Beijing Olympics, would help to offset the impact of slower export growth, he said.

    Retail sales climbed 20.6 percent in the first quarter, with both urban and rural spending increasing rapidly. The growth rate was 5.7 percentage points higher than a year earlier, the NBS said.

    NBS spokesman Li said the first-quarter figures made it difficult for the government to forecast economic growth.

    "On the one hand, we should prevent economic growth from drastically decreasing and prices from continuing to rise; on the other, we must move to curb the investment rebound."

    It had become more likely that global demand for China's exports would continue to slump and that the yuan's appreciation and the rising costs of labor and raw materials would undermine the advantages of Chinese exporters, he said.

    Source: Xinhua