CHINA'S ECONOMY grew by 10.6 per cent in the first quarter, compared with the first three months of 2007, despite widespread disruption from ice storms and power cuts to industry and transport in January and February.

The gross domestic product rise, which was above a market consensus of just above 10 per cent, means that Beijing is likely to continue tightening monetary policy in the coming months, while its big trading partners loosen credit.

After the release of the figures, the People's Bank of China, the central bank, raised the proportion of deposits that large commercial banks must keep with it by 0.5 percentage points to 16 per cent - the 16th such increase since mid-2006. Growth in the first quarter was down slightly compared with the final three months of 2007, when it stood at 11.7 per cent, mainly due to the slowing pace of export growth and the impact of severe weather.

The good news on growth was moderated by persistent high inflation, which came in at an annual rate of 8.3 per cent in March, according to official figures. Inflation hit an 11-year high of 8.7 per cent in February. -