China’s economy grew at its slowest in nearly three years in the first three months of the year, with a weaker than expected reading raising investor concerns that a five-quarter long slide has not bottomed and that more policy action would be needed to halt it.
The annual rate of GDP growth in the first quarter slowed to 8.1 percent from 8.9 percent in the previous three months, the National Bureau of Statistics (NBS) said yesterday, below the 8.3 percent consensus forecast of economists polled by Reuters.
The GDP data headlined a flurry of indicators published yesterday showing last month’s industrial output expanded 11.9 percent, retail sales rose 15.2 percent and quarterly fixed asset investment, one of the principal drivers of China’s economy, grew 20.9 percent.
Bureau spokesman Sheng Laiyun (盛來運) said there was now “enormous” pressure on exports as China’s vast manufacturing sector is hit by falling demand for in crisis-hit Europe, the country’s main export market.
“The global situation in the first quarter is complex ... the pressure on exports growth is enormous,” he told reporters.
Data released yesterday also showed residential real estate investment last month grew at its slowest annual rate since mid-2009, when policymakers were rolling out 4 trillion yuan (US$635 billion) of stimulus to escape the grip of a financial crisis that had driven global trade to a virtual halt.
Real estate investment was worth about 13 percent of China’s GDP last year and the sector directly affects more than 40 industries, making Beijing’s two year-long campaign to curb rampant property speculation one that has been felt across the economic spectrum.
“The reading of 8.1 percent is lower than expected, and that’s why Chinese Premier Wen [Jiabao (溫家寶)] has been urging policy fine-tuning,” Xu Biao, an economist at Industrial Securities in Shanghai said. “But Beijing is unlikely to roll out any big stimulus as a growth rate of 8 percent won’t hurt employment badly.”
China’s economy expanded by 9.2 percent last year, a two-year low. Economists polled by Reuters expect growth to ease further to 8.4 percent this year, which would be its slackest since 2002.
The risk of sluggish global demand for China’s exports persisting into mid-year, with much of the euro zone seen in recession and weak jobs data last week reviving concerns about the strength of the US economic recovery, is a red flag to many in financial markets.
“The main downside was with exports and some in terms of consumption,” said Kevin Lai (賴志文), an economist at Daiwa in Hong Kong. “In general, I think the first quarter export results have disappointed the consensus. We still believe there should be more policy relaxation to add to growth domestically and offset weakness in exports.”
China’s statistics agency said yesterday the country still faced difficulties stabilizing export growth.
Chinese stocks were little moved by yesterday’s data, as the market widely expects government moves to boost the economy due to slowing growth.
The Shanghai Composite Index, which covers both A and B shares, was up 0.18 percent at midday.
Additional reporting by AFP