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World woes dampen China GDP rise

CHINA'S economy grew 6.1 percent in the first quarter from a year earlier, expanding at the slowest pace on record as it was reined in by the global downturn.

But analysts interviewed yesterday said the GDP figure and other recently released economic data spark hope that China's slowdown may be bottoming out, although they were divided on how long it will take before a recovery might kick in.

And some continued to caution that China's return to double-digit growth can't come until the global recession runs its course and the country's exports pick up again.

China's gross domestic product amounted to 6.57 trillion yuan (US$939 billion) in the first three months, posting a percentage rise that was the weakest since 1992 when quarterly figures began to be released. The country's economy grew 9 percent last year, although it tailed off to a rise of only 6.8 percent in the final quarter.

The central government is targeting what it calls a "challenging but manageable" growth rate of 8 percent this year. Meanwhile, the World Bank forecasts 6.5 percent expansion.

The global financial crisis has led to deteriorating external demand and a drop in China's exports, slumping corporate profits and worsening unemployment, Li Xiaochao, spokesman for the National Bureau of Statistics, told a briefing in Beijing yesterday as the GDP figure was released.

The agricultural sector grew 3.5 percent in the first quarter, the industrial sector expanded 5.3 percent, and service industries rose 7.4 percent.

Ken Peng, a Citibank economist in Shanghai, was among those striking an optimistic tone yesterday.

"Despite the new low in year-on-year GDP growth, data at the end of the first quarter showed renewed strength in production, investment and consumer demand, as stimulus efforts kicked into higher gear," he said.

Shape of future

Li Huiyong, a Shenyin and Wanguo Securities Co economist, said the GDP slowdown was within expectations.

"The worst time is passed, and a V-shaped recovery is very likely in the second quarter, based on a raft of positive economic indicators," Li said.

Li said he expects China's economy to grow 8.3 percent this year as it picks up pace.

Some economists took a more conservative view, noting that it is still too early to declare a revival and that the recovery may be more U- or even W-shaped.

Lu Zhengwei, Industrial Bank's chief economist, said he expects full-year growth of 7.6 percent due to still-lukewarm private investment and weak exports. Investment in the first quarter was driven mainly by government-funded projects, and enthusiasm from the private sector is necessary for a sustainable recovery, he said.

"The 8 percent growth target can't be reached without fresh new stimulus measures," Lu said.

Stephen Green, Standard Chartered Bank's chief economist in China, said the government has to do two main things - trigger private investment and encourage consumers to spend - to sustain recovery.

Sherman Chan, a Moody's economist, said China appears "on track to reach or at least get very close" to its growth target but added that export prospects won't improve until the US and Europe emerge from recession.

"Exports will perhaps be the only drag on growth for the rest of the year, as this is the only area the Chinese government cannot revive," Chan said.

Premier Wen Jiabao said yesterday that the latest economic reports show that government stimulus moves have begun to produce results and the economy was now in "better-than-expected" shape.

He cited rises in investment, consumption and industrial output, abundant liquidity in the banking system and improved market expectations as signs of those "positive changes." The signs indicated that the government's macroeconomic policies since the second half of last year have been "timely, powerful, and effective," Wen said.


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