Turnover in Shanghai and Shenzhen continued to shrink, to 585 billion yuan from 625 billion yuan on Thursday.

Hong Kong’s Hang Seng Index also pulled back after seven straight sessions of gains. The Hang Seng Index slipped 0.1 per cent, or 21.34 points, to end at 21,316.47. For the week, the benchmark jumped 4.6 per cent.

The Hang Seng China Enterprises index fell 0.3 per cent, or 22.92 points, to 9,214.98.

Earlier in the day, the National Bureau of Statistics reported China’s economy grew 6.7 per cent year on year in the first quarter, edging down from 6.8 per cent in the previous quarter and broadly in line with expectations. The figure was the slowest quarterly growth China has seen since the first quarter of 2009, when the GDP expanded 6.2 per cent in the midst of a global financial crisis.

Alongside the GDP growth statistics, retail sales, factory output and fixed-asset investment all came in stronger than expected. New yuan loans also beat market forecasts and reached 1.37 trillion yuan (HK$1.64 trillion) in March.

Sinolink Securities analyst Li Lifeng said stock markets retreated as the simulative effect of economic recovery has been partly factored in earlier this week.

“Going by the sub-data, I think the economic recovery is better than what is reflected in GDP number,” Li said, adding that he believed that an upward trend for the A-share market has started.

Moody’s Investors Service also said the first-quarter GDP growth rate looks “robust”, indicating the ability of the authorities to provide economic stimulus.

“However, this stimulus to support near-term growth may further increase longer-term imbalances, particularly if they lead to a rapid increase in investment by state-owned enterprises (SOEs) that does not yield benefits in terms of profitability and value added,” said Marie Diron, senior vice-president at the rating agency.

In particular, Societe Generale noted, the monthly data for March delivered “sizeable upside surprises”, with investment, production and credit data showing improvements.

“This looks like an old-styled credit-backed investment-driven recovery, which bears an uncanny resemblance to the beginning of the ‘four trillion stimulus’ package in 2009”, SG analysts said.

They cautioned about risks including asset bubbles, excess capacity and devaluation pressure on the Chinese yuan.

Stocks in the overcrowded steel and coal sectors suffered considerable losses.

In mainland China, Angang Steel declined 2.6 per cent to 4.44 yuan and Maanshan Iron & Steel lost 2 per cent to 2.9 yuan. China Coal Energy Company fell 2.2 per cent to 5.37 yuan, and Yanzhou Coal Mining gave up 1.2 per cent to 11.33 yuan.

In Hong Kong, state-owned coal miner Shenhua Energy retreated 2.2 per cent to HK$13.18 while Angang Steel Company lost 2.2 per cent to HK$4.08.

However, some banks bucked the weak trend in both the mainland and Hong Kong, after yuan loans increased more than expected in March. China Merchants Bank rallied 2.9 per cent in Shanghai and ticked up 0.1 per cent in Hong Kong.

In the currency market, the People’s Bank of China set the yuan reference rate against the US dollar at 6.4908 on Friday, 0.03 per cent or 17 basis points weaker than on Thursday, its weakest level since March 29.

On Thursday, the central bank had set the mid-point sharply weaker, down 300 basis points or 0.46 per cent from a day earlier, representing the biggest intraday drop in three months.

With additional reporting from Jennifer Li