Economic growth falls but analysts predict an upturn
By Wang Yanlin |
April 14, 2012, Saturday
|
Print Edition
Print Edition
CHINA'S economic growth fell to its lowest level in nearly three years in the first quarter, but analysts said that may be the bottom of this round of economic slowdown.
The country's gross domestic product expanded 8.1 percent from a year earlier to 10.79 trillion yuan (US$1.71 trillion), the slowest pace in 11 quarters.
That was an easing from the 8.9 percent pace in the previous three months and fell short of market expectations of around 8.5 percent.
Lian Ping, chief economist at the Bank of Communications, said: "Weaker investment and exports were responsible for the steep moderation."
Zhang Zhiwei, a Nomura economist, said: "The economy has reached a nadir. We expect growth to rebound in the current quarter because some leading indicators measuring industrial activities and loans have shown evidence of a recovery."
Sheng Laiyun, a National Bureau of Statistics spokesman, said that despite the further slowdown from last year, China's economic growth was showing signs of stabilization, pointing to steady power consumption and steel production. He also said that, compared with other major economies, the pace of growth in China was a lot quicker.
"China is confident of maintaining stable and relatively fast growth in the future," Sheng said at a press conference in Beijing.
Key economic data in the first quarter painted a mixed picture.
Industrial production rose 11.6 percent, up from 11.4 percent in the first two months of the year.
Retail sales increased 14.8 percent in the first quarter, little changed from the 14.7 percent pace in the earlier two months.
But fixed-asset investment slowed to 20.9 percent, compared to January-February's 21.5 percent.
The data may convince policy-makers to expand economic stimulus programs, analysts said. Zhu Haibin, an economist at JP Morgan, said the government should adopt a more proactive fiscal policy, with increases in expenditure and tax cuts, and a countercyclical monetary policy, mainly through quantitative measures such as reserve requirement cuts and easing of credit policy, to ensure steady economic growth. "Such measures can also help to encourage economic restructuring in the coming months," Zhu said.
Business confidence
Zhang said there should be more policy loosening measures in the pipeline, but he no longer expected an interest rate cut in 2012 after March's higher-than-expected inflation of 3.6 percent.
Despite slower growth, Sheng said business confidence was improving, laying the foundation for future growth.
The bureau's Business Confidence Index rebounded 2.1 points to 123 in the first quarter. A reading above 100 signals optimism.
The companion Business Climate Index, which measures conditions in the marketplace, edged down half a point to 127.3, stabilizing after previous very sharp drops.
The World Bank revised its economic growth forecast for China this year to 8.2 percent on Thursday from a previous 8.7 percent, a day after the Asian Development Bank cut its previous forecast of 9.1 percent to 8.5 percent.
Both forecasts are higher than China's target of 7.5 percent growth this year.
The government lowered the country's growth target from the 8 percent in place since 2005 to shift to a quality-first model, stressing improving people's livelihoods.
The bureau said the disposable income of urban residents increased 14 percent year on year to 6,796 yuan in the first quarter, while that of rural residents rose 17 percent to 2,560 yuan.
The country's gross domestic product expanded 8.1 percent from a year earlier to 10.79 trillion yuan (US$1.71 trillion), the slowest pace in 11 quarters.
That was an easing from the 8.9 percent pace in the previous three months and fell short of market expectations of around 8.5 percent.
Lian Ping, chief economist at the Bank of Communications, said: "Weaker investment and exports were responsible for the steep moderation."
Zhang Zhiwei, a Nomura economist, said: "The economy has reached a nadir. We expect growth to rebound in the current quarter because some leading indicators measuring industrial activities and loans have shown evidence of a recovery."
Sheng Laiyun, a National Bureau of Statistics spokesman, said that despite the further slowdown from last year, China's economic growth was showing signs of stabilization, pointing to steady power consumption and steel production. He also said that, compared with other major economies, the pace of growth in China was a lot quicker.
"China is confident of maintaining stable and relatively fast growth in the future," Sheng said at a press conference in Beijing.
Key economic data in the first quarter painted a mixed picture.
Industrial production rose 11.6 percent, up from 11.4 percent in the first two months of the year.
Retail sales increased 14.8 percent in the first quarter, little changed from the 14.7 percent pace in the earlier two months.
But fixed-asset investment slowed to 20.9 percent, compared to January-February's 21.5 percent.
The data may convince policy-makers to expand economic stimulus programs, analysts said. Zhu Haibin, an economist at JP Morgan, said the government should adopt a more proactive fiscal policy, with increases in expenditure and tax cuts, and a countercyclical monetary policy, mainly through quantitative measures such as reserve requirement cuts and easing of credit policy, to ensure steady economic growth. "Such measures can also help to encourage economic restructuring in the coming months," Zhu said.
Business confidence
Zhang said there should be more policy loosening measures in the pipeline, but he no longer expected an interest rate cut in 2012 after March's higher-than-expected inflation of 3.6 percent.
Despite slower growth, Sheng said business confidence was improving, laying the foundation for future growth.
The bureau's Business Confidence Index rebounded 2.1 points to 123 in the first quarter. A reading above 100 signals optimism.
The companion Business Climate Index, which measures conditions in the marketplace, edged down half a point to 127.3, stabilizing after previous very sharp drops.
The World Bank revised its economic growth forecast for China this year to 8.2 percent on Thursday from a previous 8.7 percent, a day after the Asian Development Bank cut its previous forecast of 9.1 percent to 8.5 percent.
Both forecasts are higher than China's target of 7.5 percent growth this year.
The government lowered the country's growth target from the 8 percent in place since 2005 to shift to a quality-first model, stressing improving people's livelihoods.
The bureau said the disposable income of urban residents increased 14 percent year on year to 6,796 yuan in the first quarter, while that of rural residents rose 17 percent to 2,560 yuan.
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