China growth slowest in six years, more stimulus expected soon

Wed Apr 15, 2015 4:18am EDT
 
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By Kevin Yao and Koh Gui Qing

BEIJING (Reuters) - China grew at its slowest pace in six years at the start of 2015 and weakness in key sectors suggested the world's second-largest economy was still losing momentum, intensifying Beijing's struggle to find the right policy mix to shore up activity.

Measures to support the property sector and a series of cuts in interest rates and bank reserve requirements look to have delivered less support to the economy than hoped, apart from feeding a stock market surge, raising expectations of more stimulus soon.

Gross domestic product (GDP) grew an annual 7.0 percent in the first quarter, slowing from 7.3 percent in the fourth quarter of 2014, China's statistics bureau said. While matching the median forecast in a Reuters poll, some analysts said it seemed stronger than data on the components of growth suggested.

"Despite a headline growth rate in line with expectations, underlying economic activities appear to have softened further," Qu Hongbin, HSBC's co-head of Asian Economic Research, said in a note.

"We expect policy makers to deploy further monetary easing and other growth-supporting measures in the coming weeks."

Analysts calculated the GDP deflator had fallen 1.2 percent, a six-year low, indicating broad deflationary pressures.

Monthly retail sales, industrial output and fixed asset investment data released with the GDP figures all missed analyst expectations. Growth in fixed-asset investment (FAI), a key economic driver, was the slowest since 2000, while industrial output grew at its weakest since the global financial crisis in 2008.

Power output, which some analysts use as a proxy for economic activity, fell an annual 3.7 percent in March, the biggest fall since the 2008 crisis.   Continued...

 
The sun sets behind a residential construction site in Rizhao, Shandong province April 14, 2015.  REUTERS/Stringer