According to the NBS figures, in the first quarter China's ultimate consumption contributed 60.3 percent to the GDP, driving up GDP growth by 5.9 percentage points. Capital formation, a measure of the net additions to the physical capital stock of a country, contributed 44.1 percent to the GDP, driving up GDP growth by 4.3 percentage points. Net exports of goods and services contributed 4.4 percent negatively to the GDP, pulling down GDP growth by 0.5 percentage points.

"From these figures we find that domestic demand has contributed increasingly to economic growth," Sheng said. NBS figures show that in the first quarter the total retail sales of consumer goods reached 4.29 trillion yuan ($656.97 billion), up 16.3 percent compared with the same period last year.

Sheng said the trade deficit shows that China's trade structure is becoming more balanced and that China's attempts to create a trade balance are finally paying off.

Prices under control

Inflation is one of the biggest concerns among China's policymakers and consumers alike. According to the NBS figures, in the first quarter the consumer prices went up by 5 percent year on year, which was much higher than the target of 4 percent fixed by the government at the beginning of this year. The prices for food rose by 11 percent, the highest among all categories.

Producer prices for industrial products went up by 7.1 percent over a year ago in this year's first quarter. In March, they rose by 7.3 percent year on year, or 0.6 percent month on month. In the first quarter, the purchasers' prices for industrial products went up by 10.2 percent on a yearly basis. In March, these prices grew by 10.5 percent year on year, or 1 percent month on month.

The figures show that inflation is spreading and that increasing production costs will make anti-inflation efforts more difficult to implement.

The only upside to inflation, Sheng said, is that it will be almost impossible for the national economy to experience any stagflation, because the internal impetus for economic growth is still strong.

Since this year is the first year of the 12th Five-Year Plan (2011-15), local governments will be enthusiastic about investing in fixed assets. Growth of private investment, an indicator of China's attractiveness to outside investors, reached 31.5 percent in the first quarter.

As for consumption, although the growth of total retail sales for consumer goods declined in the first quarter, the growth was still higher than the average during the past several years. The decline was also mostly due to shrinking auto and household appliance sales.

"Because China is rapidly urbanizing, residential consumption is going through a changing phase, buying and spending more, and there will be continued room for growth in this respect," Sheng said.

In March the consumer price index (CPI) grew by 5.4 percent year on year, higher than expected. But Sheng said the high CPI growth in March is mostly because of the lagging influence of high CPI growth in the previous months.

"I think this is a good phenomenon, showing that price regulation measures of the central and local governments have achieved some effects," he said.

Keeping the CPI growth below 5 percent with the GDP growing 9.7 percent during the same period was not easy, said Sheng. The influence of the global financial crisis has not totally subsided and there are still uncertainties in the world's ability to fully recover. Recent turmoil in North Africa and the Middle East, as well as the earthquake and tsunami in Japan, increased expectations of price hikes of petroleum and related products. Besides ample liquidity in the international market, emerging economies are all going through their own rounds of inflation. In March, the CPI grew 6.3 percent in Brazil, 9.5 percent in Russia and an estimated 9 percent in India. Economic growth rates for these countries are all lower than China, but their price levels are all higher.

Pressure from imported inflation, Sheng said, is increasing. "In the overall structure of imported commodities in China, bulk commodities such as crude oil, iron ores and grain account for a large proportion, and prices of these bulk commodities are the highest," he said.

In the international market, prices of crude oil have surpassed $110 a barrel and prices of grain and many metal ores have increased more than 10 percent in the first quarter of this year. China had a trade deficit of about $1 billion in the first quarter, proving that the pressure of imported inflation is increasing.

To control inflation, China launched a series of measures such as controlling liquidity, boosting industrial production and subsidizing low-income earners. At the end of March, the balance of the broad money supply (M2) was 75.8 trillion yuan ($11.61 trillion), a year-on-year increase of 16.6 percent, which was 3.1 percentage points lower than that at the end of last year, indicating a decline in money supply.

"It is possible that prices maintain stable only if we will effectively implement the measures launched by the Central Government," Sheng said.