Among the 39 industrial sectors, 34 posted year-on-year profit growth. The five most profitable sectors were those involved in petroleum and natural gas production, non-ferrous metal smelting and pressing, transportation equipment manufacturing, production of raw chemical materials and chemical products, and coal mining and washing.

Li said China's economic development encountered severe challenges and impacts from home and abroad during the first six months of this year. Inflation picked up around the world, and prices of primary products in international markets surged. Meanwhile, international financial markets, including the stock market, foreign exchange market and the option market, experienced fierce turmoil. In China, snow storms at the beginning of this year, the Sichuan earthquake in May and floods in some regions all had great impacts on the country's economic development.

"Under such severe challenges, it is the accurate and timely macro-control measures that have contributed to such a good economic performance," said Li. "It is also closely related to the great economic achievements during the 30 years of reform and opening up, with a large economic volume, a strong ability to fend off risks and a wide area for maneuvering."

Going forward, the country faces the greatest problem of dealing with international inflationary pressures, Li said, noting that prices in both developed and developing countries have shot up and reached decade highs. Prices of primary products, especially oil and grain, have surged more than 30 percent this year.

"As the domestic economy opens further, impacts of international factors on our economy are enormous," said Li.

Besides international factors, the continuing price hike in capital goods on the domestic market also imposes great pressure on the country's CPI. In May, the producer price index (PPI) rose 8.2 percent and in June it jumped 8.8 percent. Refined oil, electricity and construction materials for post-earthquake reconstruction will be the new causes of additional price hikes, Li added.

Economic forecast

Yin Zhongli, a researcher at the Institute of Finance and Banking at the CASS, told Beijing Review that GDP growth would be lower in the second half of this year, while the CPI would continue to rise. China is now caught up in the worldwide inflationary cycle, and price hikes for oil, grain and other commodities eventually would be felt here, said Yin. Although the year-on-year growth of China's CPI dropped in June, prices for goods had not really decreased, because the CPI growth rate during the same period last year was too high. Based on the trends of the PPI in the previous months, the situation did not appear optimistic, because continual increases in producer prices would trickle down to consumer prices, he said.

Yin's advice for the next six months- The government should continue tightening monetary policy.

"Without tight macro-control, inflation would be further worsened, which would impose huge effects not only on the overall economy, but also on the stock market and real estate market," he concluded.