China’s economic growth slowed to a new three-year low, damping hopes that it can make up for US and European weakness, but analysts said a rebound may be in sight.
The world’s second-largest economy grew by 7.6 percent in the three months ending last month over a year earlier, down from the previous quarter’s 8.1 percent, data showed yesterday. That was the lowest since the first quarter of 2009 during the depths of the global financial crisis.
China’s slowdown could have global repercussions, especially at a time when the US and Europe are struggling. Lower Chinese demand could send shockwaves through Asian economies that supply industrial components to its vast manufacturing industry and exporters of oil, iron ore and other commodities such as Australia, Brazil and African nations.
Yet other indicators, including strong bank lending last month, which is closely tied to business activity, suggest the low point of the decline might be past, analysts said.
“The Chinese economy has already bottomed out in the first two quarters,” said Xiao Li, an economist at Industrial Bank in Shanghai.
“It is not certain whether or not there will be a strong upward rebound. But at least the economic growth rate will stop coming down,” Xiao said.
The slump raises the threat of job losses and political tension. That comes at a politically difficult time for the ruling Chinese Communist Party, which is trying to enforce calm ahead of a planned once-a-decade handover of power to younger leaders.
China’s export growth has fallen steadily and consumer spending has weakened despite stimulus measures that include two interest rate cuts since the start of last month. The Chinese government also is pumping money into the economy through higher investment by state-owned industry and more spending on low-cost housing and other public works.
Quarterly growth was in line with the government’s official target of 7.5 percent for the year, which private-sector forecasters say China still is likely to achieve.
“The growth rate of 7.6 percent is already an achievement because the economic situation facing China has been complex and severe,” government spokesman Sheng Laiyun (盛來運) said at a news conference. “We have seen tepid domestic and external demand.”
Sheng rejected suggestions by some analysts that the slowdown might be deeper than reported and that Beijing ordered companies to make the economy look healthier by inflating data on electric power consumption, a key industrial indicator.
“I want to say right here they are wrong,” Sheng said.
China’s rapid economic growth has decelerated steadily for eight quarters, the longest slowdown since the government began reporting such data in 1992, according to Yu Bin (余斌), a Cabinet researcher. He said the previous record was six quarters.
The slowdown is due in part to government controls imposed in 2010 and last year to cool overheating and inflation fueled in part by Beijing’s huge stimulus in response to the 2008 crisis. Chinese leaders reversed course last year and began easing controls after global demand abruptly plunged.
The government is moving cautiously after its 2008 stimulus pushed up inflation and spurred a wasteful building boom. Authorities have said curbs imposed on building and home sales to cool surging housing prices will remain in place, even though boosting the country’s slumping construction industry offers a quick way to increase growth.