CHINA'S economic growth will further moderate to 9.2 percent in the third quarter from 10.3 percent in the second due to less industrial production and investment, a government report said yesterday.

The Consumer Price Index, a main gauge of inflation, may see a 3 percent increase in the third quarter while retail sales will become a stabilizer for the economy by expanding 18.2 percent in the July-September period, the same pace as that in the first half, it said.

"In order to manage economic restructuring and cut energy use, it is impossible not to sacrifice a bit of the speed of growth," said the report by the State Information Center, a unit under the National Development and Reform Commission, the country's top economic planner.

China's industrial production and investment growth have dipped in recent months.

Industrial output gained 13.7 percent from a year earlier in June, compared with a 16.5-percent increase in May.

Urban fixed-asset investment rose 25.5 percent to 9.8 trillion yuan (US$1.45 trillion) through June, down 0.4 percentage points from that in the first five months.

The slowdown in both sectors followed the Chinese government's decision to contain credit expansion, adopt tighter measures directed at the housing sector and become more stringent over the approval of energy-intensive projects.

Rise in inflation

China has been aiming to cut energy use per unit of gross domestic product by 20 percent between 2006 and 2010.

The report predicted that industrial production may expand 12.8 percent in the third quarter, down 4.8 percentage points from the rate in the first half. Urban fixed-asset investment may also slow by 3.5 percentage points from that in the first half to 22 percent in the third quarter.

Any rise in inflation may be weaker in the third quarter after the government implemented measures in mid-April to curb speculation and runaway property prices.

Consumer prices may grow around 3 percent from a year earlier, making a yearly target of controlling CPI below 3 percent possible.

In the first half, China's consumer prices rose 2.6 percent year on year. The Producer Price Index, the factory-gate gauge of inflation, may jump 5.1 percent in the third quarter, compared with the increase of 6 percent in the first half.

However, the report said the government should still be alert to inflation against the background of recent natural disasters and their effect on farm produce prices.

The report also said many cities and regions will release plans in the third quarter to raise the price of tap water, electricity and natural gas.

The rising prices may also accelerate CPI growth, the report said.