BEIJING: China’s economy expanded 7.0 percent year-on-year in the first quarter, official data showed on Wednesday, slumping to a new post global financial crisis low and raising analyst expectations for more action to bolster growth.
The figure announced by the National Bureau of Statistics (NBS) was lower than expansion of 7.3 percent in the final three months of last year, but exceeded the median forecast of 6.9 percent in an Agence France-Presse survey of 15 economists.
The result remained the worst for a single quarter since the first three months of 2009, when the economy grew 6.6 percent in the depths of the global financial crisis.
China, the world’s number two economy and a key driver of global growth, advanced only 7.4 percent last year, down from 7.7 percent in 2013 and its slowest annual rate since 3.8 percent in 1990.
However, NBS spokesman Sheng Laiyun said: “Despite the slowing down of economic growth, employment, consumer price and market expectation remained stable.”
The economy faced “downward pressures,” he acknowledged, but “still has the potential and conditions to maintain stable growth.”
China’s leadership appears comfortable with weaker expansion, a development top officials say heralds a “new normal” of more stable, consumer-driven growth in line with an increasingly mature economy.
Still, Communist authorities want to avoid too fast a deceleration that could hurt job creation—a key component of social stability in the world’s most populous nation—and have been taking monetary steps to bolster growth.
Nomura economists said authorities were likely to take further stimulatory measures to underpin the economy.
“The weaker Q1 GDP [gross domestic product]growth and much weaker-than-expected March activity data suggest that growth momentum remains weak, which calls for further policy easing,” they wrote in a reaction.
The NBS said industrial output, which measures production at factories, workshops and mines, rose 5.6 percent year-on-year in March.
That was below a median forecast of 7.0-percent growth in a Bloomberg News survey of economists and marked the lowest reading since November 2008.
Retail sales, a key indicator of consumer spending, gained 10.2 percent in March from the year before, the NBS said, below the median 10.9 percent Bloomberg forecast.
And fixed asset investment, a measure of government spending on infrastructure, grew 13.5 percent year-on-year in January-March, the NBS added, also below a median 13.9 percent estimate in the Bloomberg survey.
This year the central People’s Bank of China (PBoC) cut benchmark interest rates for the second time in three months, loosened bank reserve requirement ratios (RRR) to spur lending and took steps to boost the slumping property market.
Economists broadly expect more such moves as authorities seek to keep growth within striking distance of their “about 7.0 percent” target for 2015.
Claire Huang, analyst at Societe Generale in Hong Kong, called the GDP figure “broadly disappointing” and expects two interest rate cuts and one RRR reduction in the current quarter, though cautioned the benefits would not be immediate.
“It will take a while before the easing measures of the government start to take effect,” she told Agence France-Presse, stressing that authorities were “tolerant of slower growth in order to improve the economic structure.”
The PBoC last month lowered minimum downpayment levels on second homes nationwide and shortened the ownership period during which sellers are liable for a 20 percent capital gains tax on properties other than their main home.
A private survey showed that declines in Chinese new house prices decelerated in March from the previous month, but they have fallen in 10 of the past 11 months.
Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch Ratings cited the correction in China’s real estate market as the biggest threat to growth.
“It’s sobering that the economy has become so reliant on construction and real estate to generate jobs,” he wrote in a reaction to the GDP data.
Authorities face further pressure from a drop in China’s first-quarter foreign reserves—the third straight quarterly decline—and a slowdown in broader financing in March, he added.
“This means the People’s Bank of China needs to do something on monetary policy just to stand still, so we should expect further loosening.”