With stable job market, China's slowing growth is no reason for pessimism
When the premier sets a sober tone ahead of the release of a GDP figure that is underwhelming by modern China's standards, you know that big challenges lie ahead for economic management. Downward pressure on the economy was increasing, Li Keqiang said on the eve of news that the mainland's growth had slowed to 7 per cent in the first quarter, down from 7.4 per cent in the same period a year earlier and from 7.3 per cent in the last quarter of 2014. Cooling factory output and retail sales combined with a real estate slump to pull the economy down to its weakest quarterly performance for six years, or since the global financial crisis.
The figures may reflect the so-called "new normal" as China's leaders try to steer the economy to slower, more sustainable growth but, coming on top of sharp falls in exports and imports last month, the latest figures added to grounds for recent government expressions of concern about the momentum of the slowdown. One of the latest was an unusual rallying call by Li to the three northeastern provinces to meet growth targets, after Liaoning , Jilin and Heilongjiang registered GDP rises well under that of the national economy last year.
That said, growth remains very respectable, looked at in any other context than recent stellar but unsustainable double-digit annual rates. More importantly, job creation is still very strong. Beijing is trying to maintain it by pushing for expansion of e-commerce, and refocusing of old external trade models on quality rather than quantity, for example by selling more equipment, investing more offshore and exporting manufacturing capacity. National Bureau of Statistics spokesman Sheng Laiyun put it into perspective: "We still are relying on a traditional growth engine, and that is declining. We are in transition between the old and new growth models."
Twice in the last four months the authorities have cut interest rates, as well as commercial banks' reserve requirements, to shore up the "new normal" of slower growth. But some economists remain concerned this may not be enough to slow the steady decline. Understandably, the latest figures will keep the pressure on the authorities to provide more support. Beijing may well do so - hopefully in a targeted approach consistent with overall policy goals. But so long as it can take comfort from the job creation figures amid economic transition, there are no grounds for undue pessimism.