China's economic growth slows further in 1Q

[April 16, 2009]  BEIJING (AP) -- China's economy grew at its slowest pace in at least a decade in the first quarter, but stronger industrial activity added to signs the slump might be bottoming out amid huge stimulus spending.

The world's third-largest economy grew by 6.1 percent from a year earlier as the global crisis battered trade, down from 6.8 percent in the previous quarter, the government reported Thursday.

Overall growth "is below expectations but positive signs are emerging that the economy possibly is bottoming out," said Credit Suisse economist Dong Tao.

Industrial output surged 8.3 percent in March from a year earlier, up from 3.8 percent growth in the first two months of the year, said Li Xiaochao, a spokesman for the National Bureau of Statistics. Investment in factories and other fixed assets soared 28.6 percent from a year earlier.

Premier Wen Jiabao, China's top economic official, said the data showed the stimulus spending was producing results and the economy was in "better than expected" shape, the official Xinhua News Agency reported.

Quarterly growth appeared to be the lowest in at least a decade, though China has repeatedly revised its historical data, making comparisons difficult. Analysts said the 6.8 percent rate in the previous quarter was the lowest since 2001 and possibly earlier.

Beijing worries that rising job losses due to the crisis will fuel unrest and its priority is creating jobs for millions of unemployed people. Some analysts say 8 percent growth -- China's official target for this year -- is the minimum needed to create enough employment. But others say the government should focus on job creation, not overall growth, because stimulus spending might inflate growth numbers without adding enough jobs.

Other areas have shown tentative improvements, with auto sales hitting a monthly high in March. But Wen has cautioned that a possible rebound is still fragile and called for vigilance and more efforts to boost growth.

The World Bank and some private sector economists see a Chinese recovery starting this year but say that will depend partly on whether demand in the United States and other Western markets recovers. The World Bank is forecasting Chinese growth of 6.5 percent this year.

A Chinese rebound could be significant for the global economy this year, boosting demand for foreign goods at a time when the United States, Japan and other major countries are expected to remain in recession.

Beijing's 4 trillion yuan ($586 billion) stimulus aims to reduce reliance on exports by injecting money into the economy through a vast program to build highways and other public works in hopes of boosting domestic consumption.

The biggest impact so far has been to boost employment and revenues at state-owned construction companies. But money is flowing into the private sector as builders pay workers, buy materials and hire subcontractors.

Wang Jian, owner of the Sheng Yuan Building Materials Co. in the eastern city of Laiwu, said orders at his 100-employee company are up 20 to 30 percent from the bleak final months of 2008, when sales fell 50 percent. He said orders for waterproofing and reinforcing materials used in highway construction have helped him avoid layoffs.

After "stop and start" work last year, "my production resumed this year and never stopped," Wang said. "As long as there is work to do every day, at least it guarantees the salaries of the workers."

Exports fell 17 percent in March, the fifth monthly decline, but that was less severe than February's 25.7 percent plunge. Analysts said that suggested trade was stabilizing, though exports should remain weak.

The collapse in demand for Chinese exports threw at least 20 million people out of work as factories closed. It is unclear how many might have found new jobs in stimulus-finance public works projects.

Consumer spending -- a key element of the recovery plan -- rose 15 percent in the quarter, the statistics bureau reported, though that rate was slightly lower than growth reported for previous months.

Consumer prices fell by 1.2 percent in March, the data showed, leaving Beijing room to cut interest rates further to boost growth without the risk that it might fuel pressure for prices to rise.

The government has to take more steps to generate jobs and domestic demand for goods exporters can no longer sell abroad, said Mei Jianping, a finance professor at the Cheung Kong Graduate School of Business in Beijing.

"Infrastructure spending and other government spending do not generate a lot of employment. That is my main concern, not economic growth," Mei said Wednesday.

"To have sustainable growth, you have to have major change," he said. "It really is a matter of how quickly they can make adjustments."

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On the Net:

National Bureau of Statistics of China (in Chinese:
http://www.stats.gov.cn/

[Associated Press; By JOE McDONALD]

Associated Press researcher Bonnie Cao in Beijing contributed to this report.

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