China policy easing ahead as growth hits 2-year low

Tue Jan 17, 2012 9:50am EST
 
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By Langi Chiang and Koh Gui Qing

BEIJING (Reuters) - China's economy expanded at its weakest pace in 2-1/2 years in the latest quarter, with the sagging real estate and export sectors heralding a sharper slowdown in coming months and fresh pro-growth measures from the government.

Growth of 8.9 percent over a year earlier was slightly stronger than the 8.7 percent forecast by economists in a Reuters poll, but the data on Tuesday raised concerns about the immediate outlook and how much support China can offer a struggling global economy.

Gross domestic output rose just 2 percent from the previous quarter, suggesting to some economists that underlying momentum is slowing more rapidly than headline data implies.

A near 40 percent plunge in the annual pace of property investment in December versus November's rate underscored risks to China's domestic demand even as it is trying to cope with those emanating from debt-ridden Europe -- China's biggest export market.

"It indicates that in Q1 2012 the numbers will be very unpleasant. Policy easing will continue," said Yao Wei, an economist at Societe Generale in Hong Kong, who forecasts growth slowing to 8.3 percent in the first three months of 2012.

"It's a very significant slowdown already in China," she said.

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GRAPHIC link.reuters.com/zeq95s   Continued...