April 20 (Bloomberg) -- China's economy, which accounted for a 10th of global growth last year, expanded more than expected in the first quarter as exports and investment surged.

Gross domestic product rose 9.5 percent from a year earlier to 3.14 trillion yuan ($379 billion), matching the fourth quarter's gain, the National Bureau of Statistics said in a statement released in Beijing. That exceeded the median 9 percent increase forecast in a Bloomberg News survey of 11 economists.

Companies including Motorola Inc. and Quanta Computer Inc. are expanding factories in China to make cell phones and notebook computers for export to the U.S., Europe and Asia. Policy makers may raise interest rates or tighten lending curbs to prevent expansion picking up in the world's fastest-growing major economy, according to investors including Geoff Lewis.

``The government would not want to see GDP growth accelerate from here,'' said Lewis, the Hong Kong-based head of investment services at JF Asset Management Ltd., which holds $57 billion of mostly Asian assets. ``We might see that policy is tightened a little.''

Shares in China fell, led by Shanghai Pudong Development Bank Co., on concern higher rates will damp loan demand. The Shanghai Composite Index fell 1.3 percent to close at 1184.19. Oil producers including CNOOC Ltd. and PetroChina Co. gained in Hong Kong, leaving China stocks in the city mixed, after crude prices rose as much as 0.9 percent on optimism demand will be sustained in the world's second-largest energy consumer.

Excessive Investment

``Investment is still too high and far exceeds the government's target,'' said Li Yan, who helps manage the equivalent of $3.62 billion with Harvest Fund Management Co. in Shanghai. ``There is pressure on interest rates to increase.''

David Cohen, director of Asian economic forecasting at Action Economics, said he expects the central bank to raise its benchmark one-year lending rate 50 basis points by the end of the year. JP Morgan Chase & Co. is forecasting a 30 basis points increase in the third quarter, followed by a similar move in the final quarter. A basis point is 0.01 percentage point.

The yield on China's benchmark seven-year government bond maturing in November 2011 closed 1 basis point lower at 3.89 percent at 3 p.m. in Shanghai. The People's Bank of China lifted its key lending rate by 27 basis points to 5.58 percent in October, the first increase in nine years.

Fixed-asset investment, which rose 23 percent to 1.1 trillion yuan in the first quarter, is ``too large,'' causing shortages of coal, oil, electricity and transport, said Zheng Jingping, a spokesman for the statistics bureau. New fees will be introduced to curb property speculation, he added.

Inflation

Premier Wen Jiabao last year ordered banks to curb lending to industries including real estate, steel and autos after surging fixed-asset investment drove raw-materials prices higher and strained power supplies. Producer prices rose a record 8.4 percent in October and blackouts in 2004 affected 24 of China's 27 provinces and its four biggest cities.

Inflation averaged 2.8 percent in the first quarter, less than the government's 4 percent limit, and producer prices increased 5.6 percent, today's statement said. Real-estate investment rose 27 percent to 232 billion yuan.

Industrial production increased 16 percent to 1.44 trillion in the first quarter, today's statement showed. Exports rose 35 percent to $156 billion and the nation had a trade surplus of $16.6 billion, compared with an $8.4 billion deficit a year earlier, the customs bureau reported April 12.

Pegged Yuan

China accounted for 26 percent of the record $617.7 billion U.S. trade deficit last year, prompting U.S. Treasury Secretary John Snow to renew calls this week for an end to the yuan's peg to the dollar. American manufacturers say the peg, which enabled the yuan to track the dollar's 9.1 percent slide against the euro in the past year, gives Chinese exporters an unfair advantage.

Investors are betting China, which last year overtook Japan to become the world's third-biggest exporter, will allow its currency to appreciate. The yuan would rise to 7.8520 in a year if freely traded from the pegged rate of 8.2770, according to forward contracts as of 2:01 p.m. in Hong Kong.

Frank Gong, an economist at JP Morgan Chase, said it is likely China will let the yuan appreciate within the next month. Tim Condon, head of Asian Financial Markets Research at ING Bank NV, forecast the yuan will be allowed to appreciate 2.5 percent versus the dollar by the end of June.

``China wouldn't want to make a move on the currency if the economy was overheating or moving to a hard landing,'' said Condon, who had the most accurate first-quarter growth forecast in the Bloomberg survey. ``Conditions are as favorable now as they are going to get.''

Low Wages

Motorola, the world's second-biggest mobile-phone maker, said its exports from China jumped 67 percent to $6.95 billion last year. Taiwan's Quanta Computer, the biggest manufacturer of notebook computers, said April 4 it will shift mass production of laptops to China, where it already employs more than 13,000 people. The two companies in 2003 were among China's four biggest exporters.

Global manufacturers are expanding in China to take advantage of wages that the Asian Development Bank says are about 1/25th those in the U.S. and one-third of Malaysia's. Foreign direct investment in China, which reached a record $60.6 billion last year, rose 9.5 percent to $13.4 billion in the first quarter, the commerce ministry reported April 12.

Investment in the world's seventh-largest economy is bolstering demand for raw materials as the U.S. shows signs of slowing and Japan and Europe stagnate. China is the world's biggest user of steel, copper and cement.

`Halcyon Days'

The cost of crude oil on the New York Mercantile Exchange, which has risen 41 percent in the past year, climbed as much as 46 cents to $52.75 a barrel in after-hours electronic trading and was trading at $52.65 by 10:55 a.m. London time. The price of nickel, used mostly to harden stainless steel, has doubled in the past two years.

Chinese demand is ``keeping the prices high and that means halcyon days for companies like us,'' said Jim Reeve, chief operating officer of Mincor Resources NL, a Perth, Australia- based nickel producer. ``If demand in China falls off, prices will reflect that and companies will cop it.''

The International Monetary Fund estimates that China accounted for about a 10th of global economic growth last year, making it second only to the U.S. in terms of impact.

The fund on April 14 forecast China's economy will expand 8.5 percent this year after growth reached an eight-year high of 9.5 percent in 2004. That's more than twice the pace of expansion it predicted for the U.S., the fastest growing of the Group of Seven industrial nations, and exceeds the 8 percent rate Premier Wen Jiabao says is necessary to raise living standards and create jobs in the world's most-populous nation.

Per capita disposable incomes in urban areas, home to a third of the nation's 1.3 billion people, rose 11 percent from a year earlier to 2,938 yuan in the first quarter, and those in the countryside increased 16 percent to 967 yuan, the statistics bureau said. Retail sales rose 14 percent to 1.5 trillion yuan, after climbing 13 percent last year.