Economic growth in Q1 drops to 7.4%

Policymakers say figures within reasonable range

Stock markets in Shanghai and Hong Kong closed slightly higher on April 16 after China reported first quarter GDP growth of 7.4 percent year-on-year, beating market expectations of 7.2 to 7.3 percent.

It is the lowest quarterly growth figure since the third quarter of 2012, although there were positive data for the job market and household income.

The nation's top policymakers said the first quarter figures for the economy are "within a reasonable range", and they will not have to launch major stimulus measures.

"Growth, employment and inflation are all within the targeted range, which shows the economy is running at a reasonable pace," said a statement issued after a State Council executive meeting presided over by Premier Li Keqiang.

Sheng Laiyun, spokesman for the National Bureau of Statistics, said China created 3.44 million new urban jobs in the period, 40,000 more than a year earlier.

Urban per capita disposable income rose by 7.2 percent in real terms from a year earlier, the bureau said. Rural income increased by 10.1 percent.

Huo Deming, an economics professor at the National School of Development under Peking University, said: "Given the Chinese economy is in a transitional period, the growth rate is quite good. Considering the uniqueness of China's economy, the deceleration is largely a result of government provocative maneuvering."

Jan Knoerich, who lectures on the Chinese economy at King's College London, said: "For more than a year, the Chinese leadership has quite successfully prepared the public for an era of lower growth rates, thus shifting public expectations on what an appropriate level of economic growth for China should be."

Slowing fixed-asset investment, industrial output and disappointing export data were behind the weakening growth.

The 8.8 percent increase in industrial production in March and the 17.6 percent growth for investment in the first quarter trailed estimates. Exports dropped by 3.4 percent from a year earlier.

However, this is evidence that the economy is increasingly moving away from traditional reliance on investment and exports, while it is largely above-expected growth in retail sales of 12 percent year-on-year that has plugged the gap.

According to the statistics bureau, total consumption now accounts for 64.9 percent of GDP, 1.1 percentage points higher than a year earlier. Considering that government spending normally accounts for 15 percent of GDP, household consumption takes up nearly half, according to Huo.

After tertiary industry overtook secondary industry to become the largest growth engine for the first time last year, the former has moved further ahead, accounting for 49 percent of GDP, leading secondary industry by 4.1 percentage points.

Dennis Pamlin, founder of 21st Century Frontiers, a consultancy based in Sweden, said: "China is moving from a traditional development pattern, with intensive resource use and old industries, to a 21st century development pattern that focuses on the welfare of people and new industrial development that is sustainable."

But many analysts have said China faces a challenging task in speeding up reform, in combating pollution, managing debts and maintaining high growth. Economists fear that any monetary easing could increase the risk posed by shadow banking, the debt buildup and excessive capacity.

A cooling property market is another concern. The value of property sales in the first quarter fell by 5.2 percent from a year earlier, while construction of new property dropped by 25.2 percent.

Property development investment, which comprised a fifth of the nation's investment, rose by 16.8 percent during the period, the weakest for the first quarter since 2009.

Contact the writer through zhengyangpeng@chinadaily.com.cn

He Wei in Guangzhou contributed to this story.

(China Daily Africa Weekly 04/18/2014 page22)