Chinese growth slides to six-year low in first quarter
by Kevin Yao and Koh Gui Qing, 2015-04-15 09:21:02.0
BEIJING — China grew at its slowest pace in six years at the start of 2015 and weakness in key sectors suggested the world's second-largest economy was still losing momentum, intensifying Beijing's struggle to find the right policy mix to shore up activity.
A series of cuts in interest rates, lower reserve ratios at banks and easing measures in the property sector look to have mostly flowed into stock market speculation without delivering much support to fundamentals. Still, the economy's persisting slowdown means more stimulus measures are expected soon.
Gross domestic product (GDP) grew an annual 7.0% in the first quarter, slowing from 7.3% in the fourth quarter of 2014, China's statistics bureau said. While that matched the median forecast in a Reuters poll, analysts said it seemed at odds with data on the components of growth.
More bad news
Monthly retail sales, industrial output and fixed asset investment data released with the GDP figures all missed analyst expectations. Growth in fixed-asset investment (FAI), a key economic driver in China, was the slowest since 2000, while industrial output grew at its weakest since the global financial crisis in 2008.
More bad news came from another major economic pillar, the property sector, with property investment rising an annual 8.5% in the first quarter, the weakest rate since 2009.
"If you look at (the first quarter), exports were poor, industrial production was poor, FAI was much slower, retail sales soft, so how can GDP in real terms still be 7%?" Daiwa senior economist Kevin Lai said in Hong Kong.
The National Bureau of Statistics did not release a breakdown of the GDP figures, saying the final figures were not yet available.
It was the weakest expansion since the first quarter of 2009, when the global financial crisis saw China's growth tumble to 6.6%. A massive stimulus package pulled the economy out of the slump but at the cost of saddling local governments with a mountain of debt.
On a quarterly basis, growth slowed to 1.3% between January and March after seasonal adjustments, the statistics bureau said, from 1.5% in the previous three months.
"Both a policy rate cut and bank reserve ratio cut are likely," RBS chief China economist Louis Kuijs said in Hong Kong. He added that the fact the monthly data did not show an improvement in March increased the pressure for a rate cut.
Stock indices up
China's stock indices, which have been on a sharp rally since Beijing began easing monetary policy in November, initially rose but then weakened after the data, with the Shanghai composite index down by more than 1%. Mainland investors have tended to celebrate weak data as they strengthen the case for more liquidity injections, some of which find their way into the stock market.
China's leadership, while emphasising the need to adapt to "a new normal" of slower but better-quality growth, have signalled growing concern about a deeper downturn that could fuel job losses and debt defaults.
Premier Li Keqiang said last week that China faced increased downward pressures, and the government should "stand up to" such pressure to protect employment and incomes.
Employment was being supported by the services sector, with the survey-based unemployment rate standing at 5.1%, according to the statistics bureau.
However, weaker growth and nagging factory deflation could force more manufacturers to cut jobs, analysts say, especially if Beijing follows through on threats to allow more defaults and bankruptcies in industries suffering from overcapacity.
"The problem of unemployment may show up if GDP growth continuously stays below 7%," Hwabao Trust economist Nie Wen said in Shanghai.
Reuters
Picture: THINKSTOCK
BEIJING — China grew at its slowest pace in six years at the start of 2015 and weakness in key sectors suggested the world's second-largest economy was still losing momentum, intensifying Beijing's struggle to find the right policy mix to shore up activity.
A series of cuts in interest rates, lower reserve ratios at banks and easing measures in the property sector look to have mostly flowed into stock market speculation without delivering much support to fundamentals. Still, the economy's persisting slowdown means more stimulus measures are expected soon.
Gross domestic product (GDP) grew an annual 7.0% in the first quarter, slowing from 7.3% in the fourth quarter of 2014, China's statistics bureau said. While that matched the median forecast in a Reuters poll, analysts said it seemed at odds with data on the components of growth.
More bad news
Monthly retail sales, industrial output and fixed asset investment data released with the GDP figures all missed analyst expectations. Growth in fixed-asset investment (FAI), a key economic driver in China, was the slowest since 2000, while industrial output grew at its weakest since the global financial crisis in 2008.
More bad news came from another major economic pillar, the property sector, with property investment rising an annual 8.5% in the first quarter, the weakest rate since 2009.
"If you look at (the first quarter), exports were poor, industrial production was poor, FAI was much slower, retail sales soft, so how can GDP in real terms still be 7%?" Daiwa senior economist Kevin Lai said in Hong Kong.
The National Bureau of Statistics did not release a breakdown of the GDP figures, saying the final figures were not yet available.
It was the weakest expansion since the first quarter of 2009, when the global financial crisis saw China's growth tumble to 6.6%. A massive stimulus package pulled the economy out of the slump but at the cost of saddling local governments with a mountain of debt.
On a quarterly basis, growth slowed to 1.3% between January and March after seasonal adjustments, the statistics bureau said, from 1.5% in the previous three months.
"Both a policy rate cut and bank reserve ratio cut are likely," RBS chief China economist Louis Kuijs said in Hong Kong. He added that the fact the monthly data did not show an improvement in March increased the pressure for a rate cut.
Stock indices up
China's stock indices, which have been on a sharp rally since Beijing began easing monetary policy in November, initially rose but then weakened after the data, with the Shanghai composite index down by more than 1%. Mainland investors have tended to celebrate weak data as they strengthen the case for more liquidity injections, some of which find their way into the stock market.
China's leadership, while emphasising the need to adapt to "a new normal" of slower but better-quality growth, have signalled growing concern about a deeper downturn that could fuel job losses and debt defaults.
Premier Li Keqiang said last week that China faced increased downward pressures, and the government should "stand up to" such pressure to protect employment and incomes.
Employment was being supported by the services sector, with the survey-based unemployment rate standing at 5.1%, according to the statistics bureau.
However, weaker growth and nagging factory deflation could force more manufacturers to cut jobs, analysts say, especially if Beijing follows through on threats to allow more defaults and bankruptcies in industries suffering from overcapacity.
"The problem of unemployment may show up if GDP growth continuously stays below 7%," Hwabao Trust economist Nie Wen said in Shanghai.
Reuters
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