BEIJING, April 17 — China is expected to report today that economic growth slowed to its weakest pace in at least 27 years in the first quarter, as policymakers seek to head off a sharper slowdown that could stoke job losses.
But China's trading partners and investors likely will focus on readings for March, hoping for signs that months of stimulus are starting to stabilise activity in the world's second-largest economy at a time when global demand looks shaky.
“The data is likely to show the clearest evidence yet of economic recovery,” though questions remain over the strength of any rebound and how long it will last, analysts at Nomura said in a research note yesterday, reflecting high expectations in the market.
Beijing has stepped up fiscal stimulus this year to shore up growth, announcing billions of dollars in additional tax cuts and infrastructure spending, while Chinese banks lent a record 5.8 trillion yuan (RM3.55 trillion) in the first quarter, more than the gross domestic product (GDP) of Switzerland.
Analysts polled by Reuters expect China to report GDP grew 6.3 per cent in the January-March quarter from a year earlier, which would be the slowest pace since the first quarter of 1992, the earliest quarterly data on record.
That would mark a further loss of momentum from the previous quarter's 6.4 per cent, which was the weakest since the global financial crisis.
But data for March, which will be released at the same time (0200 GMT), is expected to show stronger growth in industrial output, investment and retail sales, according to analysts polled by Reuters, suggesting the economy may be bottoming out, even if a turnaround is too early to call.
Premier Li Keqiang recently said changes in the economy in March had exceeded expectations, with the economy operating in a steady manner in the first quarter.
Prices for steel reinforcing bars used in construction shot to 7-1/2 year highs this week, while steel mills have ramped up output to nine-month highs as winter pollution restrictions are eased.
Analysts say an unexpectedly strong lending report on Friday set the stage for a recovery in investment in the second half of the year, though other data showed imports shrank for a fourth month and auto sales fell again, indicating domestic demand remains sluggish.
Upbeat March activity readings would add to growing optimism over China's outlook amid signs that Washington and Beijing may be nearing a deal to end their bruising trade war.
But analysts do not expect a sharp rebound in China like recoveries in the past, which created a strong reflationary pulse worldwide, noting its latest stimulus measures have so far been relatively more restrained.
More support seen needed
Some China watchers have dialed back their expectations of further policy easing in light of better-than-expected March credit and export data, and improvements in factory surveys.
But most economists believe more support will still be needed to ensure a sustainable recovery.
Earlier growth-boosting measures will take time to fully kick in, and corporate balance sheets are expected to remain under stress if profits are slow to recover from their worst slump in more than seven years.
The central bank has cut banks' reserve requirement ratios (RRR) five times since early last year to free up more funds for lending. It has also pressed banks to keep lending to struggling firms despite the risk of more bad loans, and has guided interbank interest rates lower to reduce financing costs.
Economists in the latest Reuters poll released on Friday (before the credit data) forecast three more RRR cuts of 50 basis points each in this quarter and the next two.
But the People's Bank of China (PBOC) has so far refrained from cutting benchmark lending rates as it did in past downturns, suggesting policymakers are treading more carefully in pump-priming an economy that is laden with debt from past credit sprees.
The OECD echoed those concerns in a report yesterday, saying stimulus measures will shore up economic growth this year and next but may undermine the country's drive to control debt and worsen structural distortions over the medium term.
China's economic growth cooled to 6.6 per cent in 2018, weighed down by multi-year clampdowns on riskier lending and pollution that deterred fresh investment, and by escalating US and Chinese tariffs on each others' goods.
Economists polled by Reuters expect a further pullback to 6.2 per cent in 2019 — the slowest in nearly 30 years but roughly in the middle of Beijing's 6-6.5 per cent target range. — Reuters
