Mainland GDP growth slowest in three years

PUBLISHED : Saturday, 14 April, 2012, 12:00am
UPDATED : Saturday, 14 April, 2012, 12:00am


The mainland economy grew 8.1 per cent in the first quarter, its slowest pace in nearly three years, amid weak demand in key export markets and sluggish construction activity at home.

The figure was well below the 8.9 per cent year-on-year growth of the previous three months and marked the fifth consecutive quarterly slowdown, adding pressure for Beijing to further ease monetary policies.

But just hours after the release of the data, the central government announced it would continue using macroeconomic controls to deal with the challenges.

Beijing also reiterated that it would keep its restrictions on the property market, in a statement released after a State Council meeting presided over by Premier Wen Jiabao .

The quarterly growth figure was even below market expectations of 8.3 to 8.5 per cent.

'The global situation in the first quarter is complex ... the pressure on exports growth is enormous,' a National Bureau of Statistics spokesman said.

However, analysts predicted the world's second-largest economy would avoid a hard landing, with most expecting easing measures and a rebound later in the year.

Share prices reflected this sentiment, with the Shanghai and Shenzhen stock markets up slightly and Hong Kong's Hang Seng Index jumping 1.84 per cent.

Dr Liao Qun, chief economist of Citic Bank International, said that while a continued slowdown in gross domestic product growth was widely anticipated, the pace of slowdown turned out faster than expected.

'Given such, an immediate further easing of monetary policy is called for and expected,' Liao said. 'Another cut in the reserve requirement ratio is likely to be announced in coming days.'

Bank of America Merrill Lynch analyst Ting Lu said: 'The worst is over.' He saw the quarterly figures as the low point of the cycle and kept his full-year growth target of 8.6 per cent. Lu added that strong bank lending in March, as indicated in official data released late on Thursday, pointed to the pickup. 'Most investors will accept that March is the turning point and we are now on the upturn of the cycle,' he said.

Qu Hongbin, co-head of HSBC's Asian Economics Research, said the weakening number called for more policy easing, and slowing inflation left room for easing.

Qu said he believed that Beijing would continue stepping up easing efforts through another percentage-point cut in banks' reserve requirement ratio, open market operations, tax breaks and fiscal spending on public works in the second quarter. 'Once these measures filter through, GDP growth should bottom out in the second quarter and recover to over 8.5 per cent in the second half,' Qu said. 'Our 8.6 per cent GDP projection for 2012 remains intact.'

Yu Song, an analyst with Goldman Sachs, said the government was clearly more concerned about the slowdown in growth than a possible rebound in inflation and would probably keep policy relatively loose in the foreseeable future.

Industrial value-added output grew 11.6 per cent year on year in the first quarter, accelerating from 11.4 per cent in the January-February period. However it cooled from the growth of 15.7 per cent in the first quarter of 2011. That is likely to fuel concerns about China's manufacturing, which has been hurt by falling demand in crisis-hit Europe.

But Song said industrial and other indicators had shown that China's economic performance in March had improved from the first two months and that the economy had stabilised and started to recover. The 'strong industrial production growth tells us growth momentum picked up in March'. Retail sales grew 14.8 per cent year on year in the first quarter and 15.2 per cent in March.

The property market showed further signs of cooling in the first quarter as investment growth slowed to its lowest level since the government started its property tightening campaign two years ago. Residential property sales fell 17.5 per cent to 709.9 billion yuan (HK$871.5 billion) in the first quarter.