Global markets wobbled yesterday after figures showed China's economy went into overdrive in the first quarter, heightening the prospect of further rate rises and monetary tightening, write Richard McGregorand Dave Shellock inBeijing and London.

Confounding analysts who had expected the economy to slow slightly this year, the National Bureau of Statistics in Beijing announced that gross domestic product (GDP) increased 11.1 per cent in the first quarter compared with 10.4 per cent in the final three months of 2006.

China has grown by more than 10 per cent for the past four years in succession, leading many economists to predict, at various points along the way, "hard" or "soft landings" for the economy.

"This economy has not landed - it has refuelled in mid-flight and is flying higher again," said Stephen Green of Standard Chartered Bank in Shanghai.

Inflation was higher, reaching 3.3 per cent in March, a level outside the central bank's comfort zone of below 3 per cent. But concern was muted as most of the increase resulted from rising food prices, with core inflation remaining low.

In energy-intensive industries, rolled steel production was up year-on-year 26 per cent; alumina 54 per cent; and aluminium 43 per cent.

China's stock market dropped nearly 5 per cent before the release of the GDP figures, a fall attributed by many analysts to concern about measures to rein in growth that might result from the data.

European equity markets opened under pressure but regained some of their composure. In London, the FTSE 100 index ended just 0.1 per cent lower, with mining stocks suffering most. "There are bearish implications for the FTSE, because if China tightens policy and cools its economy, demand will reduce for raw commodities," said Mark Sturdy of the Seven Days Ahead consultancy.

The acceleration of an already rapidly-growing economy prompted Wen Jiabao, Chinese premier, to warn that the government would be vigilant in monitoring prices and would also tighten the credit and money supply. "We need to prevent the economy from shifting from relatively fast growth to a state of overheating and to prevent big ups and downs," he said.

He also pointed to seven "serious" areas, ranging from the need to cut the trade surplus to lifting rural incomes and cutting pollution.

But the leadership remains committed to high-speed growth, a policy that both creates employment and ensures support for the government.