China: calm after the storm

China's breakneck growth slowed slightly between April and June but experts warned today of more interest rate hikes on the way as Beijing bids to get a grip on inflation.

The world's second biggest economy grew at an annual pace of 9.5% in the second quarter - slightly down on the 9.7% seen between January and March. This still surpassed expectations and easily eclipsed western economies.

The figures fuelled hopes of a "soft landing" for China's economy and helped to calm markets after a febrile start to the week amid fresh concerns over Europe's sovereign debt crisis.

But the cost of living has just hit a three-year high of 6.4% in China and economists are bracing themselves for more rate rises.

Tim Ohlenburg, economist with the Centre for Economics and Business Research, said: "This is only a mild slowdown from the first quarter, which shows that further monetary tightening will be needed to slow output growth to a level consistent with greater price stability."

Barclays Capital economist Jian Chang warned: "There are uncertainties. The US recovery is slowing and Europe is going to post weaker growth."