Mainland’s Q1 GDP growth slows to 7.0% year-on-year: gov’t
China Wednesday reported firstquarter growth at its slowest since the depths of the global financial crisis six years ago, stoking expectations of more action to shore up the world’s second-largest economy.
Gross domestic product (GDP) expanded 7.0 percent year-onyear in the first three months, the National Bureau of Statistics said, lower than the 7.3 percent in the final quarter of 2014 but exceeding the median forecast of 6.9 percent in an AFP survey of economists.
China is a key driver of global growth but its economy advanced only 7.4 percent last year, down from 7.7 percent in 2013 and its slowest annual rate since 3.8 percent in 1990.
Wednesday’s result remained the worst for a single quarter since the first three months of 2009, when the economy grew 6.6 percent.
However, NBS spokesman Sheng Laiyun said: “Despite the slowing down of economic growth, employment, consumer price and market expectation remained stable.”
The economy faced “downward pressures,” he acknowledged, and priority should be put on “stabilizing economic growth” and “ensuring employment.”
When the last set of GDP figures were released three months ago the NBS instead emphasized “economic transformation and structural adjustment,” and the change of tone suggested official concern over further slowdown was increasing, along with the possibility of more loosening.
The leadership appears largely comfortable with weaker expansion, a development top officials say heralds a “new normal” of more stable, consumer-driven growth in line with an increasingly mature economy.
But Communist authorities also want to avoid too fast a deceleration that could hurt job creation — a key component of social stability in the world’s most populous nation — and have been taking monetary steps to bolster growth.
This year the central People’s Bank of China (PBoC) cut bench- mark interest rates for the second time in three months, loosened bank reserve requirement ratios (RRR) to spur lending and took steps to boost the slumping property market.
Nomura economists said authorities were likely to take further stimulatory measures.
“The weaker Q1 GDP growth and much weaker than expected March activity data suggest that growth momentum remains weak, which calls for further policy easing,” they wrote in a reaction.
The NBS said industrial output, which measures production at factories, workshops and mines, rose 5.6 percent year-on-year in March.
That was below a median forecast of 7.0 percent growth in a Bloomberg News survey of economists and marked the lowest reading since November 2008.
Retail sales, a key indicator of consumer spending, and fixed asset investment, a measure of government spending, also grew below expectations.
Sheng said the unemployment rate was “stable” at about 5.1 per- cent and 3.2 million new urban jobs were created in the first quarter, which would put the country on par to beat its annual target of more than 10 million.
Chinese shares closed lower after the figures. The benchmark Shanghai Composite Index fell 1.24 percent, while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, dived 3.68 percent.
Economists broadly expect more moves to underpin the economy as the ruling party tries to keep growth within striking distance of its “about 7.0 percent” target for 2015.
Claire Huang, analyst at Societe Generale in Hong Kong, called the GDP figure “broadly disappointing” and expects two interest rate cuts and one RRR reduction in the current quarter, though she cautioned the benefits would not be immediate.
Authorities last month lowered minimum down payment levels on second homes nationwide and shortened the ownership period during which sellers are liable for a 20 percent capital gains tax on properties other than their main home.
A private survey showed that declines in Chinese new house prices decelerated in March from the previous month, but they have fallen in 10 of the past 11 months.
Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch Ratings, cited the correction in the real estate market as the biggest threat to growth.
“It’s sobering that the economy has become so reliant on construction and real estate to generate jobs,” he wrote in a reaction to the GDP data.
Authorities face further pressure from a drop in China’s first-quarter foreign reserves — the third straight quarterly decline — and a slowdown in broader financing in March, he added.
“This means the People’s Bank of China needs to do something on monetary policy just to stand still, so we should expect further loosening.”