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China GDP slowest on record

Annual economic growth slowed to 6.1 per cent from 6.8 per cent in the fourth quarter of 2008.

Written by Reuters | Beijing |
April 16, 2009 11:28:36 am

China’s economy slowed in the first quarter to its weakest pace on record,but an improvement in data for March offered tentative signs that the worst may be over for the world’s third-largest economy.

Annual economic growth slowed to 6.1 per cent from 6.8 per cent in the fourth quarter of 2008,slightly missing economists’ forecasts of a 6.3 per cent rise and marking the weakest expansion since quarterly records began in 1992. (For a graphic,click on: here)

Growth was dragged down largely by a sharp fall in exports,but a surge in lending in the first quarter spurred by the government’s 4 trillion yuan ($585 billion) stimulus package,helped cushion the blow.

“The overall national economy showed positive changes,with better performance than expected,” Li Xiaochao,spokesman for the National Bureau of Statistics,said at a news conference on Thursday.

Still,Li said the drop in exports was eroding corporate profits,reducing government revenues and making it harder to create jobs.

“The national economy is confronted with the pressure of a slowdown,” he said.

The yen gained against the dollar and other major currencies after the data,which prompted unwinding of trades by investors,who bought other currencies such as the Australian dollar and sterling,betting on a positive surprise.

Commodities markets,which had already braced for a slowdown in the first quarter,took the news in stride. Oil and copper prices were little changed after the figures were released,holding on to earlier gains.

Shares in Shanghai initially spiked to an eight-month high after the data only to give up the gains later. They traded 0.14 per cent down at 11:35 p.m. EDT.

Annual growth in urban fixed-asset investment surged unexpectedly to 28.6 per cent in the first three months,while annual industrial output growth rebounded to 8.3 per cent in March,from a record low 3.8 per cent in the first two months of the year.

Economists said there were no big surprises in the data,which confirmed a scenario of a gradual recovery in the latter part of the year,though they were divided over whether the government’s 8 per cent growth target for this year was still attainable.

“Overall,the data shows that China had a very weak start to the year,offset by some stabilization in economic conditions in March as the impact of policy stimulus starts to build,” said Brian Jackson,economist at Royal Bank of Canada In Hong Kong.

“We think that the economy will remain subdued in the next few months but should start to improve gradually in the second half of 2009.”

Still,the data kept market speculation alive that Beijing would top up its stimulus package with more spending,and economists warned that depressed global demand for Chinese-made goods would continue to weigh on the economy.

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