HONG KONG—China’s economic growth slowed in the first quarter to 6.7 per cent, largely in line with expectations, but its slowest pace since the global financial crisis.
Data reported April 15 showed that the annualized growth rate for the world’s second-largest economy ticked lower from the previous quarter’s 6.8 per cent.
But carefully targeted stimulus helped to prevent it from slowing even further, analysts said, raising hopes that growth may be stabilizing.
A prolonged slowdown took annual growth last year to 6.9 per cent, the weakest annual expansion in a quarter century. The communist leadership is seeking to steer the economy toward greater reliance on services and private consumption, and away from a growth model based on export manufacturing and investment.
Officials were cautious.
“The economy is at a critical stage of climbing uphill and getting over the structural adjustment’s hurdles and the pain of the adjustment process persists,” National Bureau of Statistics spokesman Shen Laiyun said at a press conference. “In the meantime the real economy is still in relative difficulty. Therefore the downward pressure on the economy cannot be ignored.”
Still, the latest numbers matched most economists’ expectations and suggest the economy is on track to meet the official full-year growth target of 6.5 to 7 per cent. Growth was the most subdued since a 6.2 per cent pace seen in the first quarter of 2009 during the global financial crisis.
Fixed asset investment expanded 10.7 per cent in the January-March period while industrial output grew 5.8 per cent and retail sales increased 10.3 per cent, according to the data released by the National Bureau of Statistics.
On a monthly basis, those categories improved in March from the previous two months, indicating that momentum is building. Inflation came in at 2.1 per cent.
“The recent data has been too strong to pin on seasonal factors alone and leave us hopeful that growth has now bottomed out for the time being,” Julian Evans-Pritchard of Capital Economics in Singapore said in a report.
Resorting to their usual policy tools, Chinese officials have cut interest rates repeatedly and lavished money on public works construction to counter the unexpectedly sharp downturn over the past two years.
“Data from the investment-industry nexus show that the tried and tested stimulus measures of recent months have stirred up the physical part of the economy, especially towards the end of (the first quarter), while consumption remained relatively robust,” said Louis Kuijs of Oxford Economics.
While such measures slow progress toward the goal of cutting reliance on investment, they reduce the risk of politically dangerous increases in job losses.
Last month, Chinese Premier Li Keqiang outlined market-opening reforms, seeking to reassure investors that Beijing can keep growth on track after a tumultuous year of stock selloffs and gyrations in the value of the yuan.
Li also outlined plans to shrink bloated steel and coal industries, part of a sweeping effort to reduce capacity, cut the government’s role in business and improve efficiency. About 1.8 million workers will lose their jobs at unprofitable government-owned companies, but leaders say they will be retrained for new work.
China’s exports grew for the first time since last summer in March, in annual terms, while private and official surveys of factory purchasing managers showed activity rebounded strongly. Auto sales jumped by 10 per cent.
While China’s economy has slowed from the breakneck, double-digit boom of the previous decade, it remains a key driver of the world economy and the envy of advanced nations grappling with stagnation.
Earlier this week, the International Monetary Fund trimmed its outlook for global growth, lowering it to 3.2 per cent from the 3.4 per cent forecast in January. At the same time, it cited China as one of the few global bright spots thanks to its resilient consumer spending and thriving service industries.