Main­land’s Q1 GDP growth slows to 7.0% year-on-year: gov’t

The China Post - - FRONT PAGE - BY FRAN WANG

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.

‘Broadly dis­ap­point­ing’

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.”

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