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GDP likely to expand 6.5% in Q1 on stimulus

CHINA'S economy will likely grow by 6.5 percent in the first quarter of 2009 as a stimulus package will help to counter a slump in the gross domestic product, the State Information Center said in a report yesterday.

"In the first quarter, the economy will still be in a slowdown trend to reach the bottom while the central government's series of stimulus packages will help to counter the slump," said SIC, an affiliate of China's top economic planner, the National Development and Reform Commission, yesterday.

In the fourth quarter of 2008, the economy slowed to 6.8 percent, a seven-year low.

The rise in the purchasing managers index for January and February showed some recovery in industrial output and imports of some raw materials rose, indicating higher demand, the report said.

The CLSA China Purchasing Managers' Index, a measure of conditions in the manufacturing industry, rose to 45.1 in February from 42.2 in January, though it was still below 50, which indicates deterioration.

Industrial output growth will likely hover around 7 percent, still low comparatively, the State Council, or Cabinet, said. The figure for 2008 was 12.9 percent.

Economists expect a further slowdown this year but they are divided on how sharp it could be. The central government is targeting an economic growth of 8 percent this year. The economy slowed to 9 percent in 2008, down 4 percentage points from a year ago, the sharpest annual drop in two decades.

"The Chinese economy is yet to reach a bottom. Economic data to be released this week will show a further slowdown occurred in the first two months of the year," said Sherman Chan, a Moody's economist.

Data on consumer price index, money supply and exports for February are to be unveiled today.

First-quarter exports will likely drop 9 percent from a year earlier while imports are seen to slump 25 percent, leading to an almost doubling of the trade surplus to US$80 billion, according to the SIC.

In 2008, contribution by exports to China's economy slowed to 0.8 percentage point from 2.6 percentage points in 2007, the SIC said.


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