A tar­geted, mod­er­ate stim­u­lus pack­age may be seen in fu­ture to curb the eco­nomic slow­down.”

China Daily (Canada) - - FRONT PAGE -

China’s econ­omy fell to its low­est level of growth since the 2008 global fi­nan­cial cri­sis in the first twom­onth­sof the year, and is still be­ing hurt by weak­erde­man­dand ex­cess industrial ca­pac­ity.

The Na­tional Bureau of Statis­tics re­ported on Wed­nes­day that industrial out­put growth year-on-year dropped to 6.8 per­cent in Jan­uaryandFe­bru­ary, the slow­est pace since Fe­bru­ary 2009, com­pared with 7.9 per­cent in­De­cem­ber, the di­rect re­sult of over­all de­clines in fac­tory pro­duc­tion, fixed-as­set in­vest­ment and re­tail sales.

Econ­o­mists said they now ex­pect fur­ther pol­icy eas­ing in the com­ing months to en­sure that GDP growth does not fall be­low the gov­ern­ment’s re­cently an­nounced tar­get of “around 7 per­cent” for this year.

Fixed-as­set in­vest­ment, which used to be the strong­est driv­ing force of the world’s sec­ond-largeste­con­omy, slowedto 13.9 per­cent in the first two months from the whole-year growth rate last year of 15.7 per­cent, its low­est level since De­cem­ber 2000.

Slightly more en­cour­ag­ing were re­tail sales which in­creased by 10.7 per­cent in Jan­uaryandFe­bru­ary from the same pe­riod last year. How­ever, that­wasstill slower than the 11.9 per­cent rise in De­cem­ber, and marked the weak­est growth sinceMarch 2006.

“The down­ward pres­sures on growth, stem­ming from the weak­ness in real es­tate, will re­main in the com­ing months,” said Louis Kuijs, chief econ­o­mist in China at Royal Bank of Scot­land Plc.

“We ex­pect a fur­ther 50-ba­sis-point cut in bench­mark lend­ing and de­posit in­ter­est rates, prob­a­bly in two steps, with the first step in the sec­ond quar­ter.”

Kuijs also ex­pected that quan­ti­ta­tive mon­e­tary man­age­ment will con­tinue to be key in steer­ing mon­e­tary con­di­tions this year, and­manag­ing the growth of base money is part of that.

“There are down­side risks to in­fra­struc­ture spend­ing this year. How­ever, we do not share the fears about a ‘fis­cal cliff’ that some ob­servers have, with lo­cal gov­ern­ment spend­ing com­ing down sharply be­cause of the con­straints of the new lo­cal gov­ern­ment debt frame­work,” he said.

Liu Li­gang, chief econ­o­mist in China with Australia and New Zealand Bank­ing Group Ltd, said that the gov­ern­ment could ac­cel­er­ate the ap­proval of in­fra­struc­ture con­struc­tion projects fol­low­ing the on­go­ing two ses­sions, and an­nounce fur­ther mon­e­tary eas­ing mea­sures.

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