China’s economy expanded at its slowest rate in seven years during the first quarter, the government said yesterday, but forecast-beating readings for last month raised hopes a growth slowdown in the Asian giant might be bottoming out.
GDP rose 6.7 percent in the first three months of this year, matching the median forecast of economists and within the government’s target of 6.5 to 7.0 percent for the year, and in a positive signal for the world’s second-largest economy, a key driver of global growth, industrial output rose 6.8 percent last month, accelerating from the previous month and beating expectations.
The Chinese National Bureau of Statistics figures are the latest to show improvement in the nation, where exports surged 11.5 percent year-on-year last month, beating expectations and snapping an eight-month streak of declines.
A key official index of factory activity also showed expansion for the first time in nine months.
The economy saw “sound development” in the first quarter, bureau spokesman Sheng Laiyun (盛來運) said, adding that the readings pointed to “positive changes on major indicators.”
As well as industrial output, which measures production at the nation’s factories, workshops and mines, figures for retail sales and fixed-asset investment also came in ahead of expectations in a Bloomberg News poll.
Retail sales, a key indicator of consumer spending, increased 10.5 percent year-on-year last month, the bureau said, while fixed-asset investment, a measure of mainly government spending on infrastructure, expanded 10.7 percent in the first quarter compared with the same period last year.
However, while the growth rate was “better than expected” and the economy showed “a turn to stabilization,” Sheng warned that “we can’t be over optimistic” given uncertainties in the world economy.
“Difficulties on structural adjustment persist and downward pressure on the economy cannot be ignored,” he added.
Services accounted for 56.9 percent of the economy in the first quarter, the bureau said, 2 percentage points more than last year and nearly 20 percentage points more than secondary industry, which includes mining, manufacturing and construction.
Louis Kuijs of Oxford Economics said yesterday’s figures showed “a milder deceleration than many had feared,” which was leading to “upward revisions” of growth forecasts, but the outlook for most expansion drivers was “still subdued,” he said, so “the government will need to continue to rely on stimulus, notably infrastructure investment” in order to hit its “overly ambitious” growth targets.
ANZ economists said the data suggested a “stabilization of the ‘old economy,’” but added that they were “cautious on the composition of growth,” particularly the amount derived from financial services.
They forecast that the central bank would keep interest rates low “in light of increasing cases of credit defaults,” but would be less aggressive with monetary easing as property bubbles have “started to be of a concern to policymakers.”
Credit growth surged much more than expected last month, official data showed yesterday, as new bank loans jumped to 1.37 trillion yuan (US$211 billion) and total social financing — a wider measure of credit in the real economy — shot up to 2.34 trillion yuan.
Marie Diron of Moody’s, which lowered its outlook on Chinese sovereign bonds last month due to rising debt and capital outflows, said the data attested to Beijing’s ability to “provide stimulus” to lift short-term growth rates, but she said it might “further increase longer-term imbalances” if the stimulus encourages more investment by inefficient state-owned enterprises.
She pointed to the “very large” 23.3 percent increase in investment in state-owned enterprises as a “further rise in leverage” and a “negative signal for the sustainability of growth.”
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