China's economic growth slowed further in the latest quarter but appeared strong enough to satisfy Chinese leaders who are trying to put the country on a more sustainable path without politically dangerous job losses.
China’s economic growth slowed further in the latest quarter but appeared strong enough to satisfy Chinese leaders who are trying to put the country on a more sustainable path without politically dangerous job losses.
The world’s second-largest economy grew 7.4 percent from a year earlier in the January-March quarter, down from the previous quarter’s 7.7 percent, government data showed Wednesday. It matched a mini-slump in late 2012 for the weakest growth since the 2008-09 global crisis.
Beijing is trying to guide China’s economy toward growth based on domestic consumption instead of trade and investment following the past decade’s explosive expansion. The top economic official, Premier Li Keqiang, last week ruled out new stimulus and said leaders will focus on “sustainable and healthy development.”
“Chinese growth held up better than expected last quarter and there are signs that downwards pressure on growth has eased somewhat,” said analyst Julian Evans-Pritchard of Capital Economics in a report.
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Retail sales and factory output were weaker than in the previous quarter but improved in March. On a quarter-to-quarter basis, economic growth from January to March slowed to 1.4 percent from the previous period’s 1.8 percent.
The data reflect official efforts to shift emphasis from investment-intensive industry to services such as restaurants and retailing that generate more jobs.
Credit growth slowed in March and the expansion of China’s overall money supply rose at its slowest rate since 1997. Housing sales in the first quarter declined 5.7 percent from a year earlier.
“The continued slowdown in money and credit growth is likely to keep exerting relentless downward pressure on China’s economic growth,” said Societe Generale economist Wei Yao in a report. “Without re-acceleration of debt growth, the economy is unlikely to stabilize for another quarter at least.”
Stock markets in Asia and Europe were mostly higher, shrugging off the Chinese figures because growth didn’t slow as much as forecast by analysts.
The latest economic growth is below the official annual target of 7.5 percent announced last month. But Chinese leaders appear willing to miss that target so long as the economy creates enough jobs to avoid potential unrest. In a sign of concern about employment, they launched a mini-stimulus in March of higher spending on building railways and low-cost housing.
“Policymakers appear comfortable with the current pace of growth,” said Pritchard. “The policy response to today’s numbers is likely to be muted.”
Some analysts said that with inflation relatively subdued at 2.4 percent in March, the central bank might respond by easing monetary policy and inject extra money into credit markets.
Domestic consumption is rising but more slowly than Beijing wants. In October, the government said consumption accounted for 55 percent of growth and investment for most of the rest. A government spokesman, Sheng Laiyun, said Wednesday the ratio for the latest quarter still was being calculated.
The quarterly expansion matched the third quarter of 2012, when growth tumbled after global demand for China’s exports weakened unexpectedly while the government was tightening lending and investment controls to cool surging inflation.
The past decade’s rapid growth, which peaked at 14.2 percent in 2007, was driven by an export boom and spending on factories, apartment towers and other assets. But that model is losing its ability to drive growth. It also left China with badly polluted air and water.
Chinese leaders have promised sweeping changes to make the economy more competitive and efficient, including opening more industries to private and foreign competitors.
They have issued a steady drumbeat of minor changes in recent months such as making it easier to register a business but more basic change such as in the state-controlled banking system is politically fraught and could take years.
So far this month, Chinese leaders have approved a tax cut for small businesses and agreed to create a railway development fund to receive 200 to 300 billion yuan ($35-50 billion) per year.
Last year’s economic growth of 7.7 percent was the strongest of any major economy but tied 2012 for China’s slowest expansion since the 1990s.
Weaker growth could have global repercussions, hurting Asian economies and others such as Australia and Brazil for which China is the leading market for iron ore, other commodities and industrial components.
Chinese imports suffered an unexpectedly sharp contraction of 11.3 percent in March in a sign of weak demand for raw materials in manufacturing and construction.
National Bureau of Statistics (in Chinese): www.stats.gov.cn