BOUNTIFUL HARVEST: A combine harvester reaps wheat in Chengtou Village, Shandong Province, on June 14 (LI ZONGXIAN)

China's growth engine continues to roar, but clouds of uncertainty lie ahead for the booming Asian nation. China's GDP in the first half of 2011 grew 9.6 percent year on year to 20.45 trillion yuan ($3.14 trillion). The GDP growth for the second quarter slowed to 9.5 percent from 9.7 percent in the first quarter and 9.8 percent in the October-to-December period of 2010, said the National Bureau of Statistics (NBS).

Of the 9.6-percent GDP growth, 4.6 percentage points came from consumption and 5.1 percentage points from investment, while the contribution from exports was minus 0.1 percentage point.

The Chinese economy remains on a stable and relatively fast track of growth, said Sheng Laiyun, spokesman of the NBS, at a press conference on July 13.

"Some economic indicators experienced modest corrections in the second quarter because policymakers initiated structural adjustments and scaled back some policy incentives, such as favorable purchase taxes for small cars," he said. "The government clampdown on the property markets was also a drag on growth."

But confidence in China's economic future remains high due to its growth potential, he said.

Sheng said the biggest challenge facing the country is walking the fine line between maintaining growth and managing inflation.

"It would also be an arduous task to rebalance the economy and press ahead with energy conservation and emission reduction," he added.

Controllable risks

Fears of a hard landing for the economy have gained traction as a slowdown in GDP growth indicates China's turbo-charged economy is beginning to cool. But many economists don't believe the current slowdown will amount to a slump akin to that seen during the global financial crisis.

"As China transforms the economy to rely more on domestic demand, a mild slowdown is inevitable," said Yu Yongding, a renowned researcher with the Chinese Academy of Social Sciences (CASS). "Slower growth is acceptable since the country has actually put greater emphasis on quality, instead of the quantity of growth."

As part of its 12th Five-Year Plan (2011-15), China has vowed to make vigorous efforts to propel consumption, develop the service sector and eliminate polluting and energy-guzzling businesses. The government's annual economic growth target for the next five years sits at 7 percent.

"Achieving this target won't be too problematic," said Yu, "But the country needs to remain vigilant to combat external shocks from the European debt crisis and uncertainties surrounding the U.S. dollar."