kawaraj
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Reuters
Chinas first-quarter economic growth slowed to 7.7% on a year-on-year basis, disappointing economists who had expected a median 8%, according to a Journal survey. The data suggest Chinas economic growth is slowing after a second-half revival last year. It also helps explain why Chinese officials in recent weeks have opened liquidity floodgates and pumped new money into the system.
Analysts weigh in:
March activity data surprised on the downside, indicating continued weakness in activity growth. Only retail sales rebounded amid significantly lower consumer price inflation, possibly reflecting the disappearance of distortions from the leap year effects and some rebound in dining and wining activities after Chinese New Year. Other activity indicators fell on a [year-on-year] basis even given this probable distortion, which suggests continued weakness in activity growth momentum. the continued weakness in manufacturing recovery and tightening in the property sector may continue to weigh on investment and growth in the next few months. Furthermore, we believe continued anti-corruption measures will also maintain pressure on high end consumption activities.Yu Song, Li Cui, MK Tang Goldman Sachs GS*+0.03%
Indeed, 2013 is starting to look eerily like 2012: Last year, a ramp-up in economic activity through the first few months proved short-lived, precipitating a mid-year slump and an aggressive policy response. Unfortunately, the cost of repeating this strategy looks to be prohibitively high. Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving Wen Jiabao correctthat the current economic model is unsustainable. If something is unsustainable, at some point, it wont be sustained. Despite the weakness, we dont think Q1 data will convince the government to move to an all-out loosening stance again, given employment appears to be holding up. However, financial market distress has resurfaced in some weak spots, so credit is unlikely to be tightened dramatically with a view towards avoiding defaults. In short, there is plenty more downside risk out there than upside risk. We have lost confidence in a robust recovery. Xianfeng Ren, Alistar Thornton, IHS
The economy in the near term still faces some downside risks: The outbreak of avian flu, the front-loading effects in the property market, and signs of slowed investment momentum could all sidetrack Q2 growth significantly. *While a prudent monetary policy stance remains, a policy rate hike has become less likely this year. The central bank will continue to rely on the open market operations (OMOs) to fine tune the market liquidity conditions. In our view, Chinas financial repression, coupled with a faster capital account liberalization, poses a big challenge to its financial stability and makes the monetary policy less effective. Therefore, the policy priority should focus on fast domestic financial liberalization, rather than rapid capital account opening. Liu Ligang, Hao Zhou, ANZ Research
Markets will surely get disappointed by these poor readings, but we believe growth could slightly rebound in 2Q on regained confidence and supportive policies. The fall in 1Q13 GDP growth was mainly driven by a slowdown in consumption growth due to the new leaders crackdown on government luxury spending, a pause in inventory restocking and slowdown in property [fixed-asset investment] growth due to concerns on property tightening. With alleviated fear on tightening and low inflation, we expect GDP growth to climb back to around 8.0% if the ongoing H7N9 bird flu could be [kept] under control. With a low inflation pressure (and decline in GDP growth, monetary policy stance could remain supportive of growth in 1H13 in that credit and money growth will remain at the currently elevated level. Put alternatively, its too early to call for monetary tightening. Ting Lu, Xiaojia Zhi, Weijun Hu and Robbie Li, Bank of America-Merrill Lynch
For trade, GDP, manufacturing, property and other historical Chinese economic data dating back as far as 1978, visit CRTs interactive*China Econtracker.
Economists React: Chinas GDP Growth Slows to 7.7% - China Real Time Report - WSJ
