Business / Economy

China economy loses more steam in April, more stimulus on the cards

(Agencies/Xinhua) Updated: 2015-05-13 16:23

China's investment growth rate sank to its lowest in nearly 15 years as April data showed the world's second-largest economy was still losing momentum despite a concentrated burst of policy easing measures this year.

China's central bank is expected to follow this week's interest rate cut with more stimulus in coming months, and the government may step up spending to try to energise the economy, which looks set for its worst year in 25 years.

With the official growth target of around 7 percent for the year looking increasingly at risk, and some pundits even raising fears of a hard landing, authorities may opt for more aggressive measures in a bid to head off job losses and debt defaults by local governments and companies.

"It's again worse than what most people had expected, especially on the investment side. All of this suggests that the downward pressures on growth in China are persisting, especially in the industrial part of the economy," said Louis Kuijs, China economist at Royal Bank of Scotland in Hong Kong.

"This type of data will motivate policymakers to further ease on the monetary and fiscal sides."

In addition to cutting interest rates three times in the last six months, including a move early this week, the central bank has also lowered banks' reserve requirement ratio (RRR) twice this year to spur bank lending and economic growth, and relaxed restrictions on home purchases to shore up the ailing property market, which accounts for about 15 percent of the economy.

Analysts expect policymakers to deliver more cuts in interest rates and RRR in the coming months. Policy insiders told Reuters earlier this month that the government may also ramp up state spending to shore up growth.

Kuijs has penciled in at least one more interest rate cut in the third quarter, coupled with more quantitative measures.

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