Saturday, April 11, 2009
China's Economy Slowed in Q1 But Rebound on Horizon
China's economy probably grew by 6.3 percent in the first quarter from a year earlier, marking the slowest pace of expansion in at least a decade, though some signals point to a recovery on the horizon.
The median forecast of 21 economists polled by Reuters compares with 6.8 percent growth in the fourth quarter and 9.0 percent in all of 2008.
It would be the slowest quarterly growth since such records began in 1999. The data will be released on April 16.
Full-year growth was last slower in 1990, the year after the government's bloody crackdown on pro-democracy protests around Beijing's Tiananmen Square, which prompted a pull-back in foreign investment and loans from multilateral agencies.
The quarterly gross domestic product figure will partly mask an uptick in factory output growth in March to an annual 6.0 percent, after it fell to a record low 3.8 percent in the first two months of the year, according to 24 analysts.
Deflationary pressures at the consumer level are also expected to ease, with the consumer price index down 1.2 percent from a year earlier, compared with February's 1.6 percent fall.
"We expect China's industrial production to recover and CPI deflation to moderate in March, exhibiting initial signs of economic stabilization in the near term," economists at China International Capital Corp in Beijing said in a research report.
A growing number of analysts now expect an early recovery of the world's third-largest economy, as the effects of the government's 4 trillion yuan ($585 billion) stimulus and other
measures largely offset a continued drop in exports.
Economists expect exports to fall 21.5 percent in March from a year earlier, still grim but an improvement on the 25.7 percent fall in February.
"China's economy has hit bottom in terms of GDP growth," said Gao Shanwen, chief economist at Essence Securities in Beijing. "That is to say, the most difficult time has passed."
Trade figures are scheduled for Saturday but could come earlier; other March indicators will be released alongside GDP.
Burst In Lending
Optimism that the economy could be set for a rebound stems in part from the official purchasing managers' index (PMI), which crossed back into expansionary territory in March for the first time since last September.
Analysts point to reports that lending continued to surge in March as a further sign that Beijing's determination to maintain full-year growth around 8 percent is translating into actual
spending.
The China Daily and Economic Observer both reported that banks extended a record 1.87 trillion yuan ($274 billion) in new yuan loans in March, bringing the total for the first quarter to
an eye-popping 4.56 trillion yuan -- close to Beijing's full-year target of at least 5 trillion.
The official March money supply and lending figures could come at any time. "We see rising risks to our domestic demand growth forecast amid the continuous strength in money and credit growth," Yu Song and Helen Qiao of Goldman Sachs said in a report.
They expect fixed-asset investment growth to accelerate to 27.6 percent from a year earlier in the first three months, helping to offset weak exports. The poll forecast is for a growth rate of 26.5 percent, the same as in the first two months.
Frank Gong and Qian Wang with J.P. Morgan in Hong Kong pointed to a rebound in car sales and falling steel product inventories as further evidence that industry is finding support from the government's stimulus policies.
Passenger car sales rose 10.3 percent in March from a year earlier, official data showed on Thursday.
"We expect continued improvement in industrial growth momentum, as the government's aggressive stimulus on both fiscal and monetary fronts kicks in and as the external environment improves gradually," Gong and Wang said in a note to clients.
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