JIMBARAN (Indonesia), June 18: China's economy is still growing at more than 9 per cent annually, the central bank governor said on Saturday, but he added conditions for beating down inflation had improved.

 

China grew at a breakneck pace of 9.5 per cent in 2004, and analysts expect a relatively modest slowdown this year to just under 9 per cent. Gross domestic product (GDP) was 9.4 per cent higher than a year earlier in the first quarter of 2005.

 

The economy is still growing at over nine per cent, Zhou Xiaochuan, governor of the People's Bank of China, told Reuters ahead of a meeting of Asian central bank governors on the Indonesian island of Bali.

 

He said China wanted to achieve 1.8 per cent inflation in 2005 and that conditions for meeting those aims were better this year, although he added that the country must keep reining in surging investment.

 

This year, the economic situation is better. In the scope of things, we are trying to reach 1.8 per cent inflation, Zhou said.

 

The central bank governor has said preventing a rebound in China's inflation is one of his top priorities. Chinese officials have previously said they were aiming to keep inflation at four per cent or less this year.

 

The economy is more stable. Lower inflation means it is more stable, but we are watching the price of oil and raw materials, Zhou said.

 

Analysts and officials have voiced concern that high producer costs could feed through to consumer inflation.

 

But China's most recent annual CPI rate was unchanged in May at 1.8 per cent, despite pressures stemming from high oil and commodity prices.

 

The CPI has been on a declining trend from a peak of 5.3 Per cent scaled last July and August, mainly due to ebbing grain prices.

 

Zhou also said China needed to rein in fixed asset-investment, which covers spending on things such as factories, roads and irrigation systems.

 

We still need to control investment. We also need to encourage domestic consumption, Zhou said.

 

An investment boom from 2002 to 2004 has left many industries with excess capacity, resulting in deflation for many categories of manufactured goods.

 

China's most recent investment figures showed a stronger-than-expected 28.2 per cent rise in May compared with a year ago, topping a 25 per cent forecast.

 

The investment data was the latest in a raft of monthly figures from China showing that exports and investment are still driving the world's fastest-growing major economy. May's rise was the highest published since April 2004.

 

Still, growth could ease soon as new curbs on property investment take effect and as corporate profits get squeezed by higher costs.

 

Beijing's efforts to deflate bubbles in the economy have focused on the real estate sector and industries such as cement and steel. This month, Beijing introduced a 5.5 per cent capital gains tax on homes sold within two years.

 

SHANGHAI: China has set limits on plans to sell more than $200 billion of government shareholdings in listed firms, telling companies for the first time to specify minimum stakes to be kept in state hands.

 

The move should ensure state control in sensitive sectors and reassure investors nervous about an impending flood of stock.

 

Government shareholdings are variously held by departments and agencies.-Reuters