China's rapid growth slowed in the latest quarter as Beijing steered its expansion to a more sustainable level, possibly cutting its contribution to a global recovery.
The world's second-largest economy grew 9.6 percent in the July-September quarter over a year earlier, official figures showed Thursday. That was down from the previous quarter's 10.3 percent but still by far the highest of any major economy.
Politically sensitive inflation edged up in September on higher food costs but incomes also rose strongly.
The growth decline might dent a global recovery as China's appetite for iron ore, factory machinery and other imports weakens. That could hurt the United States, Australia, Europe and other economies that are looking to relatively robust China to power exports.
"Short-term the slowdown means China will have less demand for goods from the rest of the world," said Alistair Thornton, China analyst for IHS Global Insight. "But long-term, the slowdown could be a benefit to the world economy because the Chinese economy cannot keep going at such a high pace and in such an unbalanced way."
Asian stock markets were mixed amid concern slower Chinese growth might mean less demand for raw materials and industrial components from neighboring economies.
Beijing is trying to restore normal economic conditions following a huge stimulus that helped China quickly rebound from the global crisis. Communist leaders want to guide growth to a manageable pace and encourage Chinese consumer spending to shift the economy away from heavy reliance on exports and investment. Beijing's growth target for the year is 8 percent, while the World Bank is forecasting 9.5 percent.
September's inflation rate rose to 3.6 percent over a year earlier from August's 3.5 percent — above the 3 percent official target. Driving inflation higher was a 6.1 percent jump in food costs due to shortages of vegetables and other items.
Analysts say inflation should fall back as food supplies recover. Helping to offset higher prices, urban incomes grew 7.5 percent in the first nine months of 2010 over a year earlier and rural incomes rose 9.7 percent.
"Continued fast income growth means rising food prices are not a significant social or economic problem," said CLSA analyst Andy Rothman in a report.
The government, which has clamped down on bank lending and real estate investment, said the latest economic growth rate was in line with its efforts.
China's growth soared to 11.9 percent in the first three months of the year on a flood of stimulus spending and bank lending. But Chinese leaders worry growth overshot safe levels and are trying to cool a surge in housing costs and stock speculation.
"These data point to a soft landing for the Chinese economy," said Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates.
Beijing triggered a fall in global markets this week with a surprise interest rate hike that analysts said might be aimed at curbing bank lending and encouraging consumer spending by paying more on savings.
"This is a signal that they are getting the ball rolling with meaningful policy changes in rebalancing," said Orlik.
The slowdown also was reflected in a sharp decline in China's explosive industrial growth.
The rise in factory output measured by added value fell to 13.5 percent in the latest quarter, down from the previous quarter's 15.9 percent and 19.6 percent in the first three months of the year.
Growth in spending on factories and other fixed assets also eased, rising 24 percent in September over a year ago, down from the 26.7 percent rate in the first eight months of the year.
A new five-year economic blueprint issued this week by the Communist Party's ruling inner circle reflects the emphasis on quality over quantity. It calls for "inclusive growth" that spreads prosperity to the countryside and urban poor who have missed out on China's boom.
"They feel they don't need these double-digit growth rates," said Thornton. "This could be the last year that we see double-digit growth, ever, in China."
National Bureau of Statistics (in Chinese): www.stats.gov.cn