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China growth slows to 7.7% in first quarter

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(Globalpost/GlobalPost)

China's economic growth slowed to 7.7 percent in the first quarter, data showed Monday, below expectations and fuelling concerns that a recent recovery is faltering on subdued overseas demand.

The figure for January-March from the National Bureau of Statistics (NBS) compares with a median 8.0 percent forecast in a poll of economists by AFP and marks a slowdown from 7.9 percent seen in the previous quarter.

Observers have expressed hopes China's economy, the world's second biggest, will be a driver of a global recovery and the pick-up at the end of last year -- which snapped seven straight quarters of slowing -- had reinforced those hopes.

But analysts said Monday's data and a slew of other downbeat figures recently point to a weak outlook and questioned whether policymakers would be able to address it.

In a statement the NBS cited "the complicated and volatile economic environment at home and abroad", adding that China's ruling Communist Party and government were committed to "making progress while ensuring stability".

NBS spokesman Sheng Laiyun told reporters the global economy saw "profound adjustment" in the first quarter of 2013, blaming aggressive monetary easing policies overseas for strengthening China's yuan currency and hitting exports.

"The recovery has been slow, in particular some developed countries have carried out quantitative easing policies and stepped up efforts in these regards," he said.

"This has created bigger pressure for the appreciation of currencies in developing countries and this has made it more difficult to increase exports."

Sheng did not name any individual countries but central banks in the United States and Japan have unveiled measures to support their economies with aggressive monetary easing.

Wendy Chen, a Shanghai-based economist at Nomura Securities, told AFP: "The (GDP) figure was lower than market expectations, indicating the recovery in the real economy was not on a solid foundation and remained weak."

She said given concerns about inflation rising in the next few months it was unlikely the central bank will move to stimulate the economy by cutting interest rates "as loosening monetary policy may bring greater inflationary risks".

The government "will likely take steps on the fiscal policy side, possibly continuing to promote investment in infrastructure construction", she said.

China's economy grew 7.8 percent in 2012, its slowest rate in 13 years, and authorities have kept their growth target for 2013 at a conservative 7.5 percent.

Monday's figures follow results last week showing China recorded a deficit of $880 million in March owing to softening demand in key US and European markets, while below-forecast inflation pointed to weakness at home.

Policymakers have vowed to rebalance the economy away from a reliance on the traditional growth drivers of investment and exports, and towards consumer demand.

But fixed-asset investment, a key measure of government spending on infrastructure, jumped 20.9 percent in the first quarter from the same period in 2012, the NBS said.

Still, compared with the 21.2 percent growth for the first two months of the year, the cumulative data for the first quarter indicate the pace is slowing this year.

"The GDP data coupled with weaker March data suggest weakening in the economy and puncture our narrative of an investment-led upturn," Alaistair Chan, economist at Moody's Analytics, wrote in a report.

Industrial production rose 8.9 percent year-on-year in March and 9.5 percent in the first quarter, the NBS added, while retail sales were up 12.6 percent in the month and 12.4 percent in the first quarter.

Industrial production growth had suffered a "sudden deceleration", IHS Global Insight economists Alistair Thornton and Ren Xianfang said in a report.

"In short, there is plenty more downside risk out there than upside risk," they said. "We have lost confidence in a robust recovery."

Monday's GDP figure came after Chinese President Xi Jinping last week expressed confidence in the economy, telling business leaders it was in "good shape".

He said China will probably not be able to sustain the "ultra-high speed of economic growth" of the past, but that a "relatively high speed of economic growth" will be possible.

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http://www.globalpost.com/dispatch/news/afp/130415/china-growth-slows-77-first-quarter