China First-Quarter Growth Trails Estimates as Risks Loom

China First-Quarter Growth Trails Estimates as Risks Loom
By Bloomberg News - Apr 15, 2013 10:12 AM GMT+0800

China’s economic growth unexpectedly eased in the first quarter as factory-output gains weakened, a sign the nation’s recovery from the slowest expansion in 13 years has lost momentum.
Gross domestic product rose 7.7 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compares with the 8 percent median forecast in a Bloomberg News survey of 41 analysts and 7.9 percent in the fourth quarter. March industrial production gained less than estimated while retail-sales growth matched forecasts.

Asian stocks fell as today’s data add to concerns the global recovery is faltering, with the International Monetary Fund set to lower its forecast for U.S. growth and investor George Soros warning that Germany will probably be in recession by the end of September. Moderating inflation may give new Premier Li Keqiang more room to boost domestic demand as the euro-area debt crisis clouds the outlook for exports.
“We haven’t seen any meaningful recovery in the private economy,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said before the report. “The government has to pay more attention to growth -- worries about inflation are unnecessary and confidence in growth is unmerited.”
Indicators including electricity use and railway freight, favored by Li, had already indicated first-quarter growth would be weaker than expected, said Shen, who previously worked for the European Central Bank.

Complex Situation
While the economy has had a smooth start to the year, China still faces a complex situation due to instability and uncertainty domestically and abroad, Li said in comments published yesterday by the official Xinhua News Agency.
China’s industrial output in March rose 8.9 percent, today’s report showed. That compares with the median estimate of 10.1 percent in a Bloomberg survey and a 9.9 percent pace in the first two months combined. Retail sales grew 12.6 percent, matching the median forecast. Fixed-asset investment excluding rural households in the first quarter increased 20.9 percent, against a median estimate of 21.3 percent and a 21.2 percent pace in the first two months.
Stocks fell after the GDP report. The MSCI Asia Pacific Index dropped 0.6 percent at 11:03 a.m. in Tokyo. China’s benchmark Shanghai Composite Index (SHCOMP) was down 0.6 percent at 10:03 a.m. local time.
Growth Acceleration
October-December economic growth showed the first acceleration in two years, up from the third quarter’s 7.4 percent rate. For the full year 2012, expansion was 7.8 percent, the least since 1999.
The government last month set an expansion target of 7.5 percent for this year and Premier Li said March 17 that the nation must maintain that pace through 2020 as the country seeks to double per capita income this decade.
BHP Billiton Ltd., the world’s biggest mining company, expects annual economic growth in China to moderate toward 6 percent after two years, Graham Kerr, chief financial officer of the Melbourne-based company, said at the Bloomberg Australia Economic Summit in Sydney on April 10.
Huaneng Power International Inc., the nation’s biggest electricity producer, said last week that power generation at its Chinese plants declined 2.4 percent in the first quarter from a year earlier and electricity sold slid 2.3 percent due to weakness in domestic power demand.
Increasing Incomes
While effectively coping with short-term problems and maintaining reasonable growth, more efforts should be made to improve the quality and benefits of development, with a focus on promoting economic restructuring and upgrading, expanding employment and increasing people’s incomes, Li said at an April 12 seminar, according to Xinhua.
Communist Party chief Xi Jinping’s campaign to rein in lavish spending by officials and state-owned companies has dented consumption of luxury items, with high-end restaurants, food and liquor bearing the brunt of the frugality push.
Bottles of Kweichow Moutai, China’s “most prestigious liquor,” sold for an average 1,300 yuan ($210) in March, down 28 percent from December, when military staff were banned from consuming alcohol during official functions, HSBC Holdings Plc said in an April 10 report.
March new local-currency loans were 1.06 trillion yuan, the most for that month since 2009, and aggregate financing, a broader measure of credit that includes bond and stock sales, was close to a record, aiding the nation’s recovery, central bank data last week showed. At the same time, the surge in lending stands to increase risks in the financial system that may spur the government to tighten credit.
Policy makers may have fewer concerns when it comes to inflation, as consumer-price gains in March eased more than forecast to 2.1 percent from a year earlier.
--Zhou Xin. With assistance from Ailing Tan and Zhang Dingmin in Beijing. Editors: Nerys Avery, Scott Lanman
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