Slowdown in China's economic growth to 7.7pc a test for Li Keqiang
China's economy grew at a lower-than-expected pace in the first quarter, the first big test of Premier Li Keqiang's determination to tackle long-term issues ranging from urbanisation to reform of the financial system.
Beijing appeared to play down the need for drastic monetary easing as the new leadership vowed to improve the quality of growth through reforms.
Several prominent investment houses cut forecasts for growth this year, reflecting a rising consensus about greater official tolerance of a slowdown.
Gross domestic product growth eased to 7.7 per cent, compared with 7.9 per cent in the previous quarter, the National Bureau of Statistics said yesterday. The result trailed market consensus for 8 per cent growth.
Industrial output rose 9.5 per cent, slower than the 11.6 per cent gain a year earlier, while retail sales growth moderated to 12.4 per cent from 14.8 per cent.
Growth in fixed-asset investment was unchanged at 20.9 per cent, but property investment growth eased to 20.2 per cent year-on-year, compared to 23.5 per cent growth a year earlier.
Electricity output, a gauge often watched for industrial demand, climbed only 2.9 per cent.
The Shanghai Composite Index fell 1.13 per cent to close at 2,181.94, as commodities stocks tumbled.
The bureau's spokesman, Sheng Laiyun, said the slowdown was due to "the complex and fast-changing global situation and domestic policy adjustments and controls."
Despite the slowdown, Sheng said the job market had been stable while inflation had moderated from a year earlier.
He also noted that the growth was above the official growth target of 7.5 per cent for this year.
On Sunday, a day before the release of the data, Li said at a meeting with experts and industrial leaders that "China's economy has seen a generally steady start, which would help stabilise overall expectations".
He stressed that reforms would be "the utmost cure" for the imbalanced, uncoordinated, and unsustainable problems in the economy.
More effort must be put into restructuring and upgrading the economic structure as well as adding jobs and raising people's income, Li said.
"Even though sometimes there might be a need to roll out temporary steps, we should be careful that those steps should not become hurdles against future market-based reforms and development," he said.
Societe Generale China economist Yao Wei said recent official remarks suggested "the central government doesn't seem particularly worried about the [first-quarter] deceleration".
She added: "In our view, the new leadership is making a conscious decision to focus on managing systemic risks, even though it is at the cost of slower short-term growth."
Recent aggressive credit expansion may underpin a rebound in growth in the next one or two quarters, analysts said. But they added that the impact would be restrained by overcapacity problems.
The bird flu outbreak will continue to weigh on consumer confidence, they said.
The property market is likely to cool further after local governments pledged more strict execution on curbing home purchases, analysts said.
The downside risks have pushed Societe Generale to cut its 2013 GDP growth forecast to 7.6 per cent from 7.8 per cent.
Australia and New Zealand Banking Group trimmed its forecast to 7.8 per cent from 8.1 per cent, while J.P. Morgan economist Zhu Haibin revised the prediction down to 7.8 per cent from 8.2 per cent.