China struggled out of the gate this year with its weakest quarter on record, but a pick-up in March showed the world’s third-largest economy was on track for stronger growth in coming months.
A surge in lending and public spending cushioned a collapse in exports, suggesting that while Beijing may yet do more to prop up demand, it need not launch a new stimulus package on the scale of its CNY 4 trillion ($585 billion) plan announced last year.
Annual economic growth slowed to 6.1% in the Q1 from 6.8% in the Q4, official data showed on Thursday, slightly missing economists’ 6.3% forecast and marking the weakest expansion since quarterly records began in 1992.
But analysts said that quarter-on-quarter growth, which the government does not publish, was in the range of 5.3-6.2% in the Q1, considerably above their estimates of 0.9-2.5% for the final three months of 2008.
“The overall national economy showed positive changes, with better performance than expected,” Li Xiaochao, spokesman for the National Bureau of Statistics, told a news conference. Still, Li said the drop in exports was eroding corporate profits, reducing government revenues and making it harder to create jobs. “The national economy is confronted with the pressure of a slowdown,” he said.
Many economists said momentum late in the Q1 lent credence to the government’s assurances that China can surmount the global financial crisis to attain its goal of 8% growth this year, widely seen as a minimum for creating enough jobs for the country’s ever-expanding labor force.
Shares in Shanghai see-sawed as the market digested the data to close 0.1% lower, holding on to most of their recent gains. Asian stocks pulled back from a six-month high and the safe-haven yen gained as investors abroad took China’s weak quarter as a sign of the frailty of the global economy.
When economists looked beyond the headline figure, however, they found reasons for optimism that China’s recovery will gather steam in coming quarters.
Annual growth in urban fixed-asset investment surged unexpectedly to 28.6% in the first three months, while annual industrial output growth rebounded to 8.3% in March, from a record low 3.8% in the first two months of the year.
“The economy has started to benefit from the end of the massive destocking process as well as the government’s stimulus package,” said Mingchun Sun at Nomura Global Economics in Hong Kong. “In fact, much stronger-than-expected bank lending and investment growth in the first quarter suggest that growth could be very strong in the second half,” he said.
Where opinions differed, it was about the pace of the rebound, rather than the upward direction of the economy. “We think that the economy will remain subdued in the next few months but should start to improve gradually in the second half of 2009,” said Brian Jackson, economist at Royal Bank of Canada in Hong Kong.
But the statistics agency said producer prices fell 6.0% in March from a year ago, a sharper drop than the 5.5% decline expected by economists polled by Reuters and also more severe than the 4.5% annual drop in February. (Reuters)