CHINA’S ECONOMY slowed markedly in the second quarter, to 10.3 per cent from 11.9 per cent in the first three months, as the government steadily put the brakes on the pace of credit expansion after last year’s huge stimulus plan.

The Chinese government has made regular public statements about wanting to get growth back down to a more sustainable rate, and it is keen to stop the emergence of a bubble on stock prices and real estate, but the slowdown seemed sharper than expected.

Data on Tuesday showed a sharp drop in import growth, clear evidence that cooling measures are making themselves felt.

In addition,, ongoing fears that recovery in the US and the euro zone is not taking hold are casting a pall over the country’s export sector, which has otherwise remained robust.

July industrial output slowed for a fifth month to 13.4 per cent over a year earlier, its lowest level this year. Retail sales also undershot expectations, while the central bank reported a slowdown in lending and money supply growth.

Despite the accumulation of data showing a cooling economy as the stimulus plan is rolled back, economists still expect full-year growth to outstrip last year’s 9.1 per cent, supported by fast-rising incomes and robust investment spending.

The government has been focusing on slowing down borrowing by local governments and a particular target has been property speculation. The clampdown on the credit boom also hit industrial growth, which slowed further in July, while inflation spiked to its highest level this year as summer flooding wrecked crops but analysts said the increase will likely prove to be temporary.

Wang Tao, China economist at UBS, said the data contained few surprises.

“Fixed investment and industrial production continued to decelerate, CPI inflation rose to 3.3 per cent on higher food prices, but upstream price pressures are receding. We expect no changes in monetary policy and no rate hike this year,” she said.

As expected, the slowdown in July’s urban fixed investment was mainly led by infrastructure and real estate investment, in line with expectation, said Ms Wang, while the slowdown in car sales, as well as energy-efficiency and property-tightening policies, prompted slower growth in heavy industry value added.