BEIJING: Chinese growth failed to accelerate in the second quarter despite government stimulus measures, an Agence France-Presse survey predicts, with the world’s second-largest economy forecast to record its worst annual performance in 24 years.
China’s gross domestic product (GDP) expanded 7.4 percent in the three months to June from the same period last year, according to the median forecast in Agence France-Presse’s survey of 17 economists.
The National Bureau of Statistics is scheduled to release the GDP data on Wednesday.
Growth of 7.4 percent would match the result for the January-March period, which was a slowdown from October-December’s 7.7 percent and the worst since another 7.4-percent expansion in the third quarter of 2012.
Beijing introduced a series of policies in April in response to concerns over slowing growth, including tax breaks for small enterprises, targeted infrastructure spending and the encouragement of lending in rural areas and to small companies.
Recent indicators—including growth in exports, retail sales and improvements in private and official manufacturing surveys—have helped allay worries over a possible destabilising drop-off in expansion.
“We’ve seen the introduction of some proactive fiscal policies and signs of targeted easing in monetary policy,” Liu Li-Gang, Hong Kong based economist with ANZ Bank, told Agence France-Presse.
But he added: “Whether these mini-stimulus policies can be effective will depend on whether China will further relax its monetary policy.”
Economists use the term “mini-stimulus” to highlight differences with the massive pump-priming that took place in the aftermath of the 2008-2009 global financial crisis, measures authorities say they are not contemplating now.
China’s economy grew 7.7 percent in 2013, the same as 2012, which was the worst pace since 7.6 percent in 1999.
For full-year 2014, the median forecast in the Agence France-Presse survey is for an expansion of 7.3 percent—down from 7.4 percent in the last quarterly poll three months ago.
If realized, 7.3 percent growth would be the weakest annual performance since the 3.8 percent of 1990—the year after the Tiananmen Square crackdown.
China in March set its annual growth target for this year at about 7.5 percent, the same as last year.
The objective is usually set conservatively so as to ensure being met. The last time China missed the target was in 1998 during the turmoil of the Asian financial crisis.
Officials including Premier Li Keqiang earlier this year emphasized that the goal was flexible—widely seen as a hint it may not be realized.
But last month, Li called achieving it the “inescapable responsibility” of local governments and urged “no delay” in action, an indication of concern.
China’s leaders consistently say that slower growth is good for the country as they try to wean it off decades of over-reliance on the huge yet often inefficient investment projects that have underpinned expansion.
The ultimate payoff would be a model where the country’s increasingly affluent consumers drive activity, generating more sustainable growth in the long run.
Shen Minggao, a Hong Kong-based economist with Citigroup, said the “mini-stimulus” seen this year shows “to some extent the government’s unwillingness to take the old approach seen in the past.”
Economists broadly see refinements to the limited stimulatory efforts continuing in the form of “targeted” steps, though they differ on whether authorities will go so far as cutting interest rates or reserve requirement ratios for all banks.
Despite the short-term stabilizing effect of the government efforts, some are pessimistic on the full-year outlook given nagging concerns over China’s troubled property sector.
Citigroup’s Shen says the sector, when dependent industries are included, accounts for about 40 percent of GDP, and sees “significantly” slowing growth in property investment this year.
Housing prices in major Chinese cities fell for a second consecutive month in June, an independent survey showed last month, further evidence of a deflating property bubble.
Societe Generale economist Yao Wei calls China’s housing downturn the “dark cloud” stalking the economy and expects it to linger awhile.
“In such a scenario, we hardly expect any sustained or sizable growth acceleration,” she wrote in a report.