• Tue
  • Dec 23, 2014
  • Updated: 1:45pm

China GDP growth slowest since 2012 but beats expectations

PUBLISHED : Wednesday, 16 April, 2014, 10:49am
UPDATED : Wednesday, 16 April, 2014, 12:41pm

China’s economy grew at its slowest rate last quarter since the third quarter of 2012 – though it slightly exceeded economists’ expectations – increasing the chances of policy easing, but massive stimulus looks unlikely.

The gross domestic product grew 7.4 per cent in the first quarter from a year earlier, below the official target of about 7.5 per cent growth for this year and less than the 7.7 per cent in last year’s fourth quarter, the National Bureau of Statistics said.

GDP growth was also 7.4 per cent in the third quarter of 2012, the lowest rate since 6.6 per cent in the first quarter of 2009.

Most economists had forecast GDP growth would slow to 7.3 per cent last quarter.

A cooling of the world’s second-largest economy may complicate Beijing’s plan to deepen fiscal and financial reforms, as some of the planned measures, such as liberalising interest rates further, would push up financing costs, adding to the burden on businesses.

Weak industrial activity in China may hurt commodity-exporting countries such as Australia, Indonesia and Malaysia.

Premier Li Keqiang said earlier this month he was more concerned about jobs than the GDP growth rate, ruling out any short-term “strong” stimulus.

But as money supply expanded at the lowest pace on record last month and trade unexpectedly slumped, Beijing may feel heightened pressure to ease fiscal and monetary policies to prevent a sharp slowdown.

“The downside risks in economic operations remain large, with growth engines such as investment still quite weak,” Everbright Securities chief economist Xu Gao told the Post.

He predicted further easing of monetary policy, including the possibility of trimming the reserve requirement ratio for banks.

Fixed-asset investment in the first quarter rose 17.6 per cent from a year earlier, slowing from the 17.9 per cent growth in this year’s first two months.

Industrial production grew 8.8 per cent year on year last month, a tad faster than the 8.6 per cent growth in the January-February period.

Retail sales rose 12.2 per cent year on year last month, compared with an average growth of 11.8 per cent in the first two months.


Related topics

More on this story

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive



This article is now closed to comments

It’s said that China’s economy had already reached the bottom and is now recovering, because the GDP figure is a lagging indicator.
The present uptrend is shown by
(a) the growth of the country’s ‘daily electronic product output’, and
(b) the growth of exports order in the past two months, as shown by the recent HSBC manufacturing PMI report.
(Chinese readers: ****economy.caijing.com.cn/2014-04-16/114101634.html)
A point that should be noted by the Chinese authority is that, without fresh money supply, the issuance of bonds to finance the planned micro-stimulative projects may crowd out other private investments.
Considering also the following Chinese article it can be seen that people have reached similar conclusions regarding the present Chinese economy.
This kind of consensus is not often seen in recent months.
With Xi & Li in place, chinese economy is at best sluggish for the next 8 years.
Two tell-tale signs.
1.) Anti-corruption : Corruptions are used in china for by passing the irrational regulations. Adhereing to such strict regulations would mean no business.
2.) Prostitution Clamp-down : When govt officials are busy in preventing such men-women affairs, it means regulations are irrational.
A similar argument is also presented in the following Chinese article:
You may also read the following article published by China Daily:
'China's growth remains resilient'
Stimulative policies may lead to the following problems.
Firstly, one-size-fits-all expansionary monetary policy will prevent those inefficient coal, steel and construction-materials businesses from going extinct or upgrading their productive methods.
Secondly, reduction of excess capacity will be further delayed.
Those zombie businesses will continue to occupy valuable and scarce capital and labour, hindering the efficient allocation of the economy’s resources.
To conclude, no stimulative policy is needed at present because the present slower economic growth is normal and doesn’t cause massive increase in unemployment or reduction in consumption expenditures.
In 2014, the amount of retiring population is about 24 million, compared with the new labour supply of about 22 millon.
This means a labour shortage of approximately 2 to 3 million.
Insufficient labour supply partly causes the persistent rise in labour wage rate.
The double-digit wage-rate growth is faster than the inflation rate.
There should be no pressure on China’s job market this year.
Secondly, China’s lack-of-consumption problem has been exaggerated.
China’s statistical data may not be able to truly reflect the real consumption pattern.
And many private consumption expenditures are disguised as business expenditures, like the spending on the country’s imported luxury cars.
Thirdly, the recent fall in China’s monthly export figures is partly due to last year’s enlarged bases caused by fake exports invoicing.
This is especially the case if the sharp fall in China’s exports to Hong Kong is taken into consideration.
Worsening HSBC manufacturing PMIs partly indicates that China’s traditional manufacturing industries have been undergoing healthy reduction of excess capacity --- it doesn’t mean the whole economy has been weakening.
Indeed the Markit/HSBC Services PMIs have been performing quite well.
‘The Markit/HSBC PMI found that service-sector firms remained very optimistic in March, generally expecting business activity to be higher than current levels in one year.
Services made up 46.1 percent of gross domestic product in 2013, having overtaken manufacturing as China's biggest employer in 2011.
It has weathered the global slowdown much better than the factory sector.’
Policy-supported tertiary industries have been booming.
‘Beijing may feel heightened pressure to ease fiscal and monetary policies to prevent a sharp slowdown.’
In economics, for every argument there is always a counter-argument to counter-argue it.
And for every counter-argument, there is always a count-counter-argument to counter-counter-argue it.
And so on ad infinitum.
The following Chinese article counter-argues that at present, no expansionary policy is needed to stimulate China’s economy.


SCMP.com Account