First quarter Chinese GDP grew 7.4 percent, according to the National Bureau of Statistics, compared to 7.7% during the previous quarter. Although quarter-on-quarter growth was slower, the country’s latest GDP figures were better than analysts had expected.
In March 2014 compared to March 2013:
- Factory production rose 8.8%.
- Retail sales, a key indicator of consumer spending, grew 12.2%.
- Fixed asset investment, a measure of government infrastructure spending, increased by 17.6%.
The National Bureau of Statistics (NBS) said first quarter Chinese GDP was lower because of economic structural reforms at home, the Lunar New Year, and a slower-than-expected global economic rebound.
According to NBS spokesman Sheng Laiyun, China is in the “crucial stage of structural reform”. Authorities are in the middle of ridding the country of obsolete industrial capacity, while conserving energy and protecting the environment have “definitely come at a price.”
Chinese GDP growth has slowed down in four of the last six quarters. Beijing says it accepts slower growth as long as what remains is solid and sustainable.
In 2013, Chinese authorities had set a target of 7.5% GDP growth for 2014 in its effort to stabilize economic growth after several years of rapid expansion. They added that the target is “flexible”, suggesting there is a good chance figures could end up lower.
China has not missed an annual growth target since the Asian financial crisis in 1998. Chinese GDP expanded 7.7% last year and by the same amount in 2012, the worst growth figures since 1999 (7.6%).
(Source: National Bureau of Statistics)
First quarter Chinese GDP growth often slower
Several nations in Asia and other parts of the world monitor Chinese GDP data closely, especially those that export commodities and industrial components.
With the Lunar New year holiday falling at the beginning of the year, the first quarter is commonly a slower one compared to the others. However, economists are concerned that published data since the beginning of the year on industrial and manufacturing production have been especially sluggish, raising fears that perhaps the Chinese economic miracle may have run its course.
There is hope that the economy has bottomed out and will perform more robustly from the second to fourth quarters.
Mini-stimulus to boost economy
The Chinese Communist Party introduced a mini-stimulus at the beginning of April, which included tax concessions for small- and medium-sized businesses, as well as increased spending on the country’s railways.
The Chinese mainland announced a tie-up with Hong Kong, opening up a cross-border stock investment pilot scheme which is set to start in about six months’ time.
A free-trade zone was announced in Shanghai in January, as part of the latest economic reforms. Foreign companies will be allowed to make gaming consoles within the zone and then sell them across the country. Since 2000, there had been a nationwide gaming consoles ban.
In an interview with the BBC, Julain Evans-Pritchard, from Capital Economics, said “Chinese growth held up better than expected last quarter and there are signs that downwards pressure on growth has eased somewhat.”
Sharp fall in import-exports
Chinese March trade figures showed a steep fall in both exports and imports. March exports were 6.6% down compared to the same month in 2013, while imports were 11.3% lower. February exports had also dropped, year-on-year by 18.1%. Exports had not fallen for two consecutive months since 2009.
China’s Premier, Li Keqiang, said the country will consider rolling out more growth-supporting policies, but wants to avoid major stimulus programs.
Video – Chinese GDP grew 7.4% in Q1 2014