China first-quarter GDP at 18-month low, to cut reserve ratio for small banks

Wed Apr 16, 2014 10:51am EDT
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By Adam Rose and Xiaoyi Shao

BEIJING (Reuters) - China's economy expanded 7.4 percent between January and March, its slowest pace in 18 months, prompting authorities to act for the second time in as many weeks to shore up growth.

Hours after the National Bureau of Statistics released the data, Premier Li Keqiang was quoted by state media as saying that China would reduce the amount of cash that some village banks hold at the central bank to help the farm sector.

The relaxation of reserve requirements, alongside tax breaks for more companies to support job creation, comes just two weeks after China took its first step this year to juice its slackening economy - cutting taxes for small firms and speeding up investment in railways.

The unveiling of new pro-growth measures in quick succession suggests China may be more worried about the foundering economy than it lets on, even though it has ruled out the use of major stimulus to fight short-term dips in growth.

"We don't expect the amount of liquidity released to be significant for the economy," Zhang Zhiwei, an economist at Nomura in Hong Kong, said in reference to the reduction in the reserve requirement ratio for village banks.

"Nonetheless, this is another loosening signal from the government, which suggests it is probably more concerned about the economic outlook."

The gross domestic product data was slightly stronger than the median forecast of 7.3 percent in a Reuters poll, but still slower than 7.7 percent in the final quarter of 2013.

It was China's slowest annual growth since the third quarter of 2012, when the world's second-largest economy also grew 7.4 percent.   Continued...

Labourers work at a construction site in Beijing, April 16, 2014. REUTERS/Kim Kyung-Hoon