BEIJING: China’s economic expansion slowed in the first three months of this year, according to an Agence France-Presse survey, and remains on track for its worst annual performance in nearly a quarter-century as reform priorities trump growth concerns.
Gross domestic product (GDP) in the January-March period expanded 7.3 percent from the same period last year, the median forecast in Agence France-Presse’s survey of 13 economists said.
The National Bureau of Statistics is scheduled to release GDP data for the first quarter on Wednesday.
The result would mark the fourth slowdown in the past six quarters. It comes as the government signals a willingness to accept weaker growth, as the country’s economic model pivots away from decades of double-digit expansion fuelled by big-ticket investment projects.
Now, authorities say they want consumer spending and other forms of private demand to propel the world’s second-largest economy into a future of more sound and sustainable growth, though they are quick to emphasize that rebalancing must not come at the expense of job creation.
China’s ultimate success or failure in retooling its economic model has broad implications for the rest of the world, which has come increasingly to rely on the country as a driver of global growth as the West emerges slowly from the 2008 financial crisis.
Tang Jianwei, Shanghai-based economist with Bank of Communications, said Chinese authorities will be careful to strike a balance between supporting growth and pushing reform, but will avoid large-scale stimulus.
“The focus is still on reform,” he told Agence France-Presse.
China last month set its annual growth target for this year at about 7.5 percent, the same as last year.
But officials, including Premier Li Keqiang, have been quick to stress that the target is flexible—seen as a hint it may not be reached.
Li said authorities are focused on how growth contributes to improving livelihoods, stressing it “needs to ensure fairly full employment and needs to help increase people’s incomes.”
The last time China missed the growth target was in 1998 during the Asian economic crisis.
GDP grew 7.7 percent in 2013, the same result as 2012, which was the worst pace since 7.6 percent in 1999.
The last time annual growth came in below 7.6 percent was 1990—the year after the Tiananmen Square crackdown when China was hit by international sanctions and GDP grew just 3.8 percent.
For the full-year 2014, the median forecast in the Agence France-Presse survey is for an expansion of 7.4 percent.
The International Monetary Fund (IMF) believes China is now on course for medium-term growth “substantially below the 10-percent average rate recorded during the past 30 years”.
In a report last week, the IMF predicted GDP would grow 7.5 percent this year and 7.3 percent next year.
Economic indicators in the first quarter of this year have shown weakness in areas including trade, industrial production, manufacturing and prices.
“China saw a soft start to 2014, with the main indicators having disappointed the market so far this year,” Sun Junwei, China economist at HSBC, said in an e-mail.
She added, however, that growth could get a boost as “mini-stimulus” measures announced earlier this month—including tax breaks for small companies and targeted infrastructure outlays—move through the system towards the end of the current second quarter.
Premier Li last week, however, downplayed expectations for significant moves to juice growth.
“We will not resort to short-term stimulus policies just because of temporary economic fluctuations and we will pay more attention to sound development in the medium- and long-run,” he said in a speech, state media reported.
Yet economists said further weakness may tip the government’s hand.
“Growth could slip further in the second quarter,” Wendy Chen, Shanghai-based economist at Nomura International, told Agence France-Presse.
“And if the economy showed signs of a further slowdown, it’s very likely for China to introduce easing measures in both monetary and fiscal policies, pushing the overall economy to rebound in the second half.”
Chen said that a cut in the reserve requirement ratio, which is the amount of cash banks must keep on hand, is likely.