China's economy expanded at the weakest pace since 2009 last quarter, with output, investment and retail data pointing to a deepening slowdown.
Gross domestic product rose 7 percent in the three months through March from a year earlier, the statistics bureau said in Beijing Wednesday, matching the median estimate of economists and the leadership's full-year expansion target. Data for the month of March showed industrial production was weaker than all 40 estimates in a Bloomberg News survey.
While China's leaders have signaled tolerance for a slower expansion as they seek to rein in debt risks, corruption and pollution, today's reports speak to the case for policy makers to deploy greater stimulus. Premier Li Keqiang's government has already relaxed home-purchasing rules, cut interest rates twice and reduced the reserves banks must set aside in recent months.
"I am surprised at how weak the March industrial production is," said Wang Tao, chief China economist at UBS AG in Hong Kong. "The impact of monetary policy is limited but they do need to cut rates." She said that the government also will have to take steps to address a slowdown in the real estate sector and boost infrastructure spending.
Underscoring the effect slowing investment is having on the ground, Zoomlion Heavy Industry Science and Technology Co. Ltd., the Changsha-based construction machinery manufacturer, on Tuesday flagged a first quarter loss. The company cited the continued slowdown in fixed-asset investment and delays in projects because of the Lunar New Year holidays.
Asian stocks slipped from an almost seven-year high and the Australian dollar dropped against most peers.
Industrial production rose 5.6 percent in March from a year earlier, compared with the 7 percent median estimate of analysts. Retail sales climbed 10.2 percent, compared with the 10.9 percent median projection. Fixed-asset investment excluding rural areas expanded 13.5 percent in the first quarter, compared with the 13.9 percent seen by economists.
Li is seeking to engineer a transition away from debt-fueled investment growth toward an economy where consumers and services make up a bigger share. Last month, the premier said that policy makers will step in to support the economy if jobs and wages are hurt by the slowdown.
"It is urgent for policy makers to do more now to stimulate the economy," said Dariusz Kowalczyk, senior economist at Credit Agricole SA in Hong Kong. "We expect acceleration in fiscal spending and in government-orchestrated infrastructure projects, as well as more monetary easing."
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