ECONOMIC GROWTH in China, the world’s second largest economy, fell to its lowest level in nearly three years in the first quarter, but analysts said they expect a rebound in coming months.
China’s economy expanded 8.1 per cent year-on-year in the first quarter of 2012, the National Bureau of Statistics (NBS) said yesterday, slowing from 8.9 per cent in the fourth quarter of last year.
China’s rapid growth has been falling steadily since 2010 as a slump in global demand has put pressure on its exporters and Beijing tightened lending and investment curbs to cool an overheated economy and surging inflation.
Chinese data is closely watched as a serious slump in China would badly hit demand for fuel, industrial goods, raw materials and consumer goods at a volatile time for the global economy. European and US growth is still weak.
The quarterly growth was the slowest in 11 quarters and failed to match market expectations of 8.3 per cent to 8.5 per cent.
On a quarterly basis the country’s economy grew 1.8 per cent in the first three months, the bureau’s spokesman Sheng Laiyun said. “China’s economy is stabilising,” he said. “We believe the economy will continue maintaining moderately steady growth in the future because the country’s economic fundamentals have not changed.”
China was still undergoing a rapid process of industrialisation, urbanisation, marketisation and internationalisation, which would unleash huge investment and consumption potential.
Wang Tao at UBS said the slowdown was “old news” and remained upbeat on future prospects, with signs of stabilisation and improvement. “Sequential momentum of real export growth and property sales have stabilised, orders in the PMI have edged up, while raw material inventories are coming down, and business sentiment and, more importantly, bank credit are improving,” she said.
The rebound in production and the price of some construction material also suggests real demand is coming back.
For Ms Wang the most important revelation from the March data is that policy easing has been under way and is already reflected in the monthly new lending.
“Wait no further for another catalyst or for additional policy easing, the increase in credit will lead to a rebound in investment and GDP growth in Q2. Of course, earning should follow as well.”
Brian Jackson, a Hong Kong- based economist with Royal Bank of Canada, said the moderation in Chinese growth reflected not only the impact of the weaker global economy but also the result of moves by Beijing at cooling the economy to ease price pressures and rebalancing the economy.
He expects quarterly year-on-year growth to stabilise and recover modestly over the rest of the year to about 8.75 per cent in the fourth quarter, yielding an annual GDP growth forecast of 8.4 per cent.
“This would still represent a significant drop from the 9.2 per cent annual growth recorded in 2011 and would indeed be the lowest annual growth number since 2001, but is broadly in line with Beijing’s stated intentions to rebalance the economy to a more sustainable footing, even if this is at the expense of high growth.”
Other recent figures have shown Chinese factory activity, retail sales and exports accelerating in the first quarter.
Diana Cholyeva at Lombard Street Research was bearish on the outlook for the Chinese economy, saying if Beijing was relying on exports to pull its economy out of the doldrums it could be disappointed. “Euro-land is not coming out of its recession soon, while even though the US and Japan seem set to grow close to trend they are unlikely to be global growth locomotives.”
