China’s economy expanded 7 percent year-on-year in the first quarter of this year, official data showed yesterday, slumping to a new low in the wake of the global financial crisis and raising analyst expectations for more action to bolster growth.
The figure announced by China’s National Bureau of Statistics was lower than expansion of 7.3 percent in the final three months of last year, but exceeded the median forecast of 6.9 percent in a survey of 15 economists.
The result was the worst for a single quarter since the first three months of 2009, when the economy grew by 6.6 percent in the depths of the global financial crisis.
Last year, China’s economy grew by just 7.4 percent, down from 7.7 percent in 2013 — its slowest annual rate since 3.8 percent in 1990.
However, bureau spokesman Sheng Laiyun (盛來運) said: “Despite the slowing down of economic growth, employment, consumer price and market expectation remained stable.”
The economy faced “downward pressures,” but “still has the potential and conditions to maintain stable growth,” he said.
Nomura economists said Chinese authorities were likely to take further stimulatory measures.
“The weaker Q1 GDP growth and much weaker-than-expected March activity data suggest that growth momentum remains weak, which calls for further policy easing,” they wrote in a reaction.
This year the People’s Bank of China cut benchmark interest rates for the second time in three months, loosened bank reserve requirement ratios (RRR) to spur lending and took steps to boost the slumping property market.
Economists broadly expect further measures as authorities seek to keep growth within striking distance of their “about 7 percent” target for this year.
Hong Kong-based Societe Generale SA economist Claire Huang called China’s GDP figure “broadly disappointing,” and expects two interest rate cuts and one RRR reduction in the current quarter, but added that the benefits would not be immediate.
“It will take a while before the easing measures of the government start to take effect,” she told reporters, emphasizing that central Chinese government authorities were “tolerant of slower growth in order to improve the economic structure.”
The central bank last month lowered minimum down payment levels on second homes nationwide and shortened the ownership period during which sellers are liable for a 20 percent capital gains tax on properties other than their main home.
A private survey showed that declines in Chinese new house prices decelerated last month from the previous month, but they have fallen in 10 of the past 11 months.
Fitch Ratings head of Asia-Pacific sovereigns Andrew Colquhoun cited the correction in China’s real-estate market as the biggest threat to growth.
“It is sobering that the economy has become so reliant on construction and real estate to generate jobs,” he wrote in a reaction to China’s GDP data.
Authorities face further pressure from a drop in China’s first-quarter foreign reserves — the third straight quarterly decline — and a slowdown in broader financing last month, he added.
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