Weak China GDP growth no signal for fresh stimulus

Fri Apr 13, 2012 8:38am EDT
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By Nick Edwards

BEIJING (Reuters) - Speculation that China's weakest quarter of annual economic growth since the global financial crisis will trigger a flood of policy support to fight the downturn misses a crucial point - the taps are already turned on.

The annual rate of GDP growth in the first quarter slowed to 8.1 percent from 8.9 percent in the previous three months, the National Bureau of Statistics said on Friday, below the 8.3 percent consensus forecast of economists polled by Reuters.

China's stock market rallied despite the disappointing data, on the hope that the poor first-quarter showing would be enough to spur more assistance from Beijing, perhaps easier lending terms or more government spending.

But China's fiscal policy has been firmly pro-growth since the autumn of 2011 and easier monetary policy in the form of 100 basis points of required reserve ratio (RRR) cuts has given banks some 800 billion yuan ($127 billion) of extra cash to lend.

A huge bounce in new lending in March - 25 percent ahead of economist forecasts at 1.01 trillion yuan - signals that money is being put to work and the consensus view is that there's at least 1.2 trillion yuan more where that came from already earmarked for action for the rest of the year.

"Policy has already been loosened. We might not have seen interest rate cuts or that many RRR cuts so far, but with loan data surprising on the upside it looks like policy has been loosened sufficiently," Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters.


Zhang's view resonates because he once had one of the most bearish views in the market on China's 2012 growth prospects.   Continued...

A labourer walks on coils of steel wire at a steel market in Shenyang, Liaoning province April 13, 2012. China's economy grew at its slowest in nearly three years in the first three months of 2012, with a weaker than expected reading raising investor concerns that a five-quarter long slide has not bottomed and that more policy action would be needed to halt it. REUTERS/Sheng Li