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China growth slows to 7.7% in first quarter

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(Globalpost/GlobalPost)

Growth in China slowed to 7.7 percent in the first quarter, data showed Monday, below forecasts and fuelling fears a recent pick-up in the world's number-two economy is faltering on weak overseas demand.

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

Observers have expressed optimism China's economy 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 -- reinforced those hopes.

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

The GDP statistics unsettled investors, who pushed the Shanghai Composite Index down more than one percent to close at its lowest level since the end of December.

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," 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 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 that 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".

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

Monday's figures followed statistics last week showing China recorded a trade 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.

Fixed-asset investment, a key measure of government spending on infrastructure, jumped 20.9 percent year on year in the first quarter, the NBS said.

But 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.

"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 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."

The GDP figures 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-0