China’s Economy Surges in Quarter

China’s economy grew a faster-than-expected 9.7% in the first quarter from a year earlier, and the government said its failure to curb investment and prevent shortages of raw materials was fueling inflation.

The world’s sixth-largest economy barely slowed from year-over-year growth of 9.9% in the fourth quarter, the National Bureau of Statistics said Thursday.

“Irrational investments in redundant low-level construction projects in certain industries and selected areas have not been controlled effectively,” spokesman Zheng Jingping at China’s statistics bureau said.

The continuing boom in China may add more upward pressure on commodity prices worldwide, including oil.

Higher commodity prices helped drive up inflation in the United States in the first quarter to a 5.1% annualized rate, the U.S. Bureau of Labor Statistics said Wednesday.

Chinese Premier Wen Jiabao last month targeted 7% growth for 2004, warning that transport and energy bottlenecks were the biggest threats to an economy that consumed a third of global steel production last year.

China’s central bank may raise interest rates in addition to the higher reserve requirements imposed on banks Sunday, some experts said.

“What the government has done is not working very well” to control growth, said Andy Xie, economist at Morgan Stanley Asia Ltd. The nation’s economy has been expanding at its fastest pace since 1996.

China’s measures to rein in lending have been ineffective because many banks are under the control of local governments, whose main interest is in creating jobs and boosting growth in their own regions, analysts said.

Spending by local governments on factories, roads and other infrastructure surged 65% in the first two months of the year, more than five times the 12% increase in central government spending.