|
 Measures to support the property sector and a series of cuts in
interest rates and bank reserve requirements look to have delivered
less support to the economy than hoped, apart from feeding a stock
market surge, raising expectations of more stimulus soon.
Gross domestic product (GDP) grew an annual 7.0 percent in the first
quarter, slowing from 7.3 percent in the fourth quarter of 2014,
China's statistics bureau said. While matching the median forecast
in a Reuters poll, some analysts said it seemed stronger than data
on the components of growth suggested.
"Despite a headline growth rate in line with expectations,
underlying economic activities appear to have softened further," Qu
Hongbin, HSBC's co-head of Asian Economic Research, said in a note.
"We expect policy makers to deploy further monetary easing and other
growth-supporting measures in the coming weeks."
Analysts calculated the GDP deflator had fallen 1.2 percent, a
six-year low, indicating broad deflationary pressures.
 Monthly retail sales, industrial output and fixed asset investment
data released with the GDP figures all missed analyst expectations.
Growth in fixed-asset investment (FAI), a key economic driver, was
the slowest since 2000, while industrial output grew at its weakest
since the global financial crisis in 2008.
Power output, which some analysts use as a proxy for economic
activity, fell an annual 3.7 percent in March, the biggest fall
since the 2008 crisis.
More bad news came from the real estate sector, a major economic
pillar and where investment rose an annual 8.5 percent in the first
quarter, the weakest rate since 2009.
"If you look at Q1, exports were poor, industrial production was
poor, FAI was much slower, retail sales soft, so how can GDP in real
terms still be 7 percent?" said Kevin Lai, senior economist at Daiwa
in Hong Kong.
The National Bureau of Statistics did not release a breakdown of the
GDP data, saying the final figures were not yet available.
WEAKEST SINCE GLOBAL CRISIS
It was China's weakest expansion since the first quarter of 2009,
when the global financial crisis saw growth tumble to 6.6 percent. A
massive stimulus package pulled China out of the slump, but saddled
local governments with a mountain of debt.
Sheng Laiyun, the spokesman at the statistics bureau, sought to
allay fears that the slowdown was getting out of hand.
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"The risk of the Chinese economy having a 'double dip' or a 'hard
landing' is very small," he told reporters, adding that China would
meet its 2015 GDP growth target of around 7 percent.
The stock market <.SSEC> <.CSI300>, which has surged about 70
percent since Beijing began cutting rates in November, ceded early
gains to be down 0.9 percent. Mainland investors have tended to see
weak data as strengthening the case for easier policy and cash
injections, some of which flow into shares.
And many analysts did see further easing as imminent, as Wednesday's
data followed figures showing a fall in exports in March and
slower-than-expected growth in money supply."We maintain our
forecasts of one interest rate cut in the second quarter and two
additional reserve requirement ratio cuts, with the risk of more,"
economists at Barclays said in a note.
DEFLATION RISKS
Chinese leaders, while emphasizing the need for slower but
better-quality growth, have made clear they would not tolerate
widespread job losses, a danger that is contained for now. A
survey-based unemployment rate was flat at 5.1 percent, Sheng from
the statistics agency said, unchanged from 2014.
Yet some analysts warned this could change if deflationary risks
push firms to shed more jobs, and if Beijing carries out threats to
allow more companies fighting overcapacity to fail.
"This is an economy in need of substantially easier financial
conditions," Westpac economists said in a note.
"Lower benchmark lending rates, in addition to a more energetic
quantitative effort from the People's Bank of China, should come
into play without undue delay."
(Additional reporting by Pete Sweeney in Shanghai; Editing by John
Mair)
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