BEIJING—China's economy slowed further in the first quarter of 2016, though policies aimed at reviving it appeared to gain traction in March.
China's gross domestic product expanded by 6.7% in the furst quarter from a year earlier, down from a 6.8% reported gain in the previous quarter, the National Bureau of Statistics said Friday.
The figure was in line with a median 6.7% increase forecast by 14 economists polled by The Wall Street Journal. It was the slowest quarterly growth for China since the first quarter of 2009, when the economy expanded 6.2% from the year-earlier period.
In the past month, some confidence has returned, fueled in part by sharp property-price rises in China's major cities and some lessening in the currency volatility and capital outflows that spilled over onto global markets last year and early in 2016. In March, China's foreign-exchange reserves grew for the first time in five months.
Nerves were rattled on Thursday, however, when the yuan and other Asian currencies dropped sharply against the dollar after Singapore's central bank restrained appreciation in its currency to spur growth.
But there were signs in Friday's data release that a host of stimulus measures put in place over the past 15 months are, at long last, having some positive impact. Industrial output, fixed-asset investment and retail sales all rose more than expected in March after a weak performance in January and February.
Trading in the Shanghai Composite Index rose modestly in early Friday trading after the data was released.
Since November 2014, China has enacted six interest-rate cuts, several reductions in required bank reserves and streamlined hundreds of infrastructure projects aimed at putting a floor under the economic slide. Last year, the economy grew by 6.9%, its slowest pace in 25 years, as factories continue to pump out more goods than there is demand for.
China raised its 2016 fiscal deficit target to 3% of gross domestic product from last year's 2.3% and is expected to draw on substantial off-budget funds to further spur growth. Premier Li Keqiang said this week that the central government will front-load its investment spending in the first half of the year to maximize the impact.
But economists say Beijing's strong tilt toward growth threatens to delay the reforms necessary to reduce overcapacity, put the economy on a more sustainable longer-term trajectory and sharply reduce the number of money-losing "zombie" companies unable to repay their debt without having banks roll over their loans.
China has announced plans to close about 10% of the excess capacity in the steel industry over the next several years, but industry analysts say that is less than half the amount needed to bring supply in line with demand.
"No matter how much they say they're going to cut zombies, I don't see them doing it," said Alicia García Herrero, economist with investment bank Natixis, part of France's Groupe BPCE. "I really think they believe they can reduce excess capacity without substantial reform."
—Liyan Qi and Grace Zhu contributed to this article.
Write to Mark Magnier at mark.magnier@wsj.com
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