BEIJING --China said first-quarter gross domestic product rose 6.1% from a year earlier, its worst quarterly economic growth in nearly two decades. Other fresh data, however, hinted that the deepest part of the downturn may have passed amid a huge wave of government spending.
The data issued Thursday prompted heady calls from some economists declaring outright recovery in the world's third-largest economy. Beijing itself struck a more cautious note.
"The national economy is confronted with the pressure of slowdown," said Li Xiaochao, spokesman for the National Bureau of Statistics, which issued the figures. "The foundation is not firm; the task is still very arduous," Li said.
The 6.1% rise -- roughly in line with economists' median expectations of 6.0% growth -- was lower than the 6.8% expansion in the 2008 fourth quarter, and a dramatic slowdown from 2007's full-year growth of 13%.
Li cited the impact of the international financial crisis, large declines in exports, slumping corporate profitability, a worsening jobs landscape, and a decline in fiscal revenue as key factors pressuring China's economy.
Still, many economists say China's economic growth likely accelerated in the first quarter from the last quarter of 2008 - a change that isn't apparent in the headline figure as China provides only year-on-year comparisons.
Nomura economist Robert Subbaraman said the economy probably began turning around in late February or early March. "GDP is the most rear-view mirror of all the economic statistics. If you look at the March data for (fixed-asset investment), loan growth and industrial production, they have all picked up strongly from earlier in the quarter."
The government's stimulus program has been ramping up investment to counteract a steep fall in exports, which were down 19.7% in the first quarter from a year earlier. Fixed-asset investment in urban areas, China's benchmark measure of capital spending, rose 30.3% in March from the year-ago period, picking up from 26.5% growth in the first two months of this year.
March industrial production, the key driver of China's manufacturing-heavy economy, grew by 8.3% in March from a year earlier, accelerating from a 3.8% gain in January and February.
Merrill Lynch's Lu Ting went as far as to say that China is the first major economy to recover from the global downturn.
Other economists were more tempered. "So far, the recovery is quite narrow," said Macquarie Securities analyst Paul Cavey, since bank loans and spending on infrastructure are the key drivers of growth now.
UBS Securities economist Wang Tao estimated that first-quarter GDP grew around 7% from the fourth quarter on an annualized, seasonally adjusted basis.
"The stimulus policies -- both fiscal and credit expansion -- led by the government is certainly the main driver of the rebound. The full impact of those stimulus policies will be shown in the coming months," Wang said. She expects sequential growth of 12% in the second quarter, although she cautioned that the push from the stimulus may taper off toward the end of the year.
The world's third-largest economy is being closely watched by investors for signs it will recover before crisis-stricken Western nations. Demand from China could provide support to export-dependent Asian neighbors such as Singapore and Japan, whose economies are contracting sharply. Producers of iron ore, copper and oil - from Australia to Latin America to the Middle East - are looking to China's CNY4 trillion (around $585 billion) economic stimulus program to drive demand for commodities.
China appears "on track to reach - or at least get very close" to its stated target of around 8% GDP growth in 2009, said Moody's Economy.com analyst Sherman Chan. She added, however, that "export prospects won't improve until the U.S. and Europe emerge from recession."
The stimulus has been supported by consumer spending that has been surprisingly resilient during the global downturn. Car sales hit a monthly record in March, and home purchases and air travel both have been rising this year after sharp falls last year. In March, retail sales rose 14.7% from a year earlier, down only slightly from a 15.2% rise in January and February.
Still, concerns about deflation and excess capacity in manufacturing persist as prices continue to fall. China's consumer price index for March fell 1.2% from a year earlier, the statistics agency said, after dropping 1.6% in February and gaining 1.0% in January.
Li said China should prepare for possible deterioration in the economy and prepare a contingency plan for changes in the economy.
The Shanghai Composite index fell as much as 1.5% after the GDP figure was dislosed; shares later recovered somewhat and were down 0.1% at 2532.54 in midday trading.
"Beijing is more likely to unveil new stimulus measures if the GDP data were below expectations. Since the actual data offered no surprises, stocks fell as the policy hopes of some investors have been dashed," said Guotai Junan Securities analyst Xu Yinhui.
(WSJ)
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