China could miss its official growth target for the first time in 16 years, a snap poll of economists by Agence France-Presse showed after surprisingly weak data for January and last month.
Industrial output, a key measure of production at factories, workshops and mines in the world’s second-largest economy, rose just 8.6 percent in the first two months of this year, the slowest pace in five years, Chinese government figures showed on Thursday.
Retail sales, an indicator of consumer spending, increased at the lowest rate since February 2011, while growth in fixed asset investment, a gauge of government spending on infrastructure, came in at a surprisingly low 17.9 percent during the period, according to the data.
In a survey of 10 economists on Friday, the median forecast for this year’s growth was 7.4 percent, with some saying the weak start to the year had led them to cut their annual predictions.
At the just-concluded National People’s Congress, Chinese Premier Li Keqiang (李克強) set this year’s growth target at “around 7.5 percent,” lower than last year’s actual expansion of 7.7 percent — which was unchanged from 2012 and the worst since 7.6 percent in 1999.
“We have a level of flexibility by setting the target at around 7.5 percent,” the premier said.
“The disappointing economic data in January and February will be a test of the government’s tolerance level, as this pace of deceleration has rarely been seen before,” Hong Kong-based Mizuho Securities economist Shen Jianguang (沈建光) said in a research note.
He cut his projection for this year’s growth from 7.5 to 7.3 percent.
Bank of America Merrill Lynch analysts also lowered their prediction from 7.6 to 7.2 percent for the full year due to the “significantly weaker than expected” data in the first two months.
Meanwhile, Goldman Sachs said that if economic growth falls to less than 7.5 percent in the first quarter, there will be “significant risks of not hitting the annual target.”
China’s top leaders have said they are ready to accept slower expansion as they seek to transform the economy’s growth model away from an over-reliance on often wasteful investment, and instead make private demand the driver of future development.
“We think the government will not let growth slide below the 7.0 percent mark,” Wang Tao (汪濤), a UBS economist in Hong Kong, said in a report.
Key downside risks ahead this year include uncertainties in export recovery, credit volatilities related to China’s multitrillion-dollar shadow banking sector — heightened by the country’s first-ever default on a domestic corporate bond last week — and a “more pronounced” property slowdown, she said.
“New leaders are now facing a critical test: whether they can stabilize the economy without significantly compromising the progress of lowering debt risks,” Societe Generale analyst Yao Wei (姚煒) said in a research note.