Saturday 24 March 2018

China growth slows to six-year low as stimulus fails to find traction

A man walks past the People's Bank of China HQ in Beijing Picture:Tomohiro Ohsumi
A man walks past the People's Bank of China HQ in Beijing Picture:Tomohiro Ohsumi

China grew at its slowest pace in six years at the start of 2015 and weakness in key sectors suggested the world's second-largest economy was still losing momentum, intensifying Beijing's struggle to find the right policy mix to shore up activity.

A series of cuts in interest rates, lower reserve ratios at banks and easing measures in the property sector look to have mostly flowed into stock market speculation without delivering much support to fundamentals. Still, the economy's persisting slowdown means more stimulus measures are expected soon.

Gross domestic product grew an annual 7.0 percent in the first quarter, slowing from 7.3 percent in the fourth quarter of 2014, China's statistics bureau said. While that matched the median forecast in a Reuters poll, analysts said it seemed at odds with data on the components of growth.

Monthly retail sales, industrial output and fixed asset investment data released with the GDP figures all missed analyst expectations. Growth in fixed-asset investment (FAI), a key economic driver in China, was the slowest since 2000, while industrial output grew at its weakest since the global financial crisis in 2008.

More bad news came from another major economic pillar, the real estate sector, with property investment rising an annual 8.5 percent in the first quarter, the weakest rate since 2009.

"If you look at Q1, exports were poor, industrial production was poor, FAI was much slower, retail sales soft, so how can GDP in real terms still be 7 percent?" said Kevin Lai, senior economist at Daiwa in Hong Kong.

The National Bureau of Statistics did not release a breakdown of the GDP figures, saying the final figures were not yet available.

It was the weakest expansion since the first quarter of 2009, when the global financial crisis saw China's growth tumble to 6.6 percent. A massive stimulus package pulled the economy out of the slump but at the cost of saddling local governments with a mountain of debt.


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