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China's quarterly growth slows to 18-month low

Publication Date : 18-04-2014


China's economic growth slowed to an 18-month low for the first three months of this year, though it managed to beat market expectations and add over three million new jobs, easing fears of a drastic downturn in the short term.

First-quarter gross domestic product (GDP) expanded by 7.4 per cent from a year ago, slowing from the previous quarter's 7.7 per cent. It was the slowest pace since the third quarter of 2012.

Still, the performance, which was slightly ahead of analysts' forecast of 7.3 per cent, should ease some of the worries of a hard landing, said United Overseas Bank economist Suan Teck Kin.

This could also ease pressure on Premier Li Keqiang to rush out fresh stimulus to ensure the economy grows fast enough to instill confidence in enterprises to keep hiring, pointed out Fudan University Professor Yuan Zhigang.

The Chinese leader has pledged to make creating 10 million urban jobs Beijing's top priority this year, in order to maintain social stability as a record seven million college graduates are expected to enter the job market this year.

Relieved investors pushed up Asian bourses yesterday, with the benchmark Shanghai Composite Index rising 0.17 per cent to close at 2105.122. Hong Kong shares ended the day 0.1 per cent higher, while the Straits Times Index went up 0.21 per cent.

Stock markets also rose on speculation that Li may go ahead anyway to introduce measures to ensure growth in the coming months does not drop further, amid weaker-than-expected investment and falling home sales.

The quarter-on-quarter growth rate in the first three months was 1.4 per cent compared with 1.7 per cent in the last three months of 2013.

If this sequential slide continues, GDP growth should drop to below 7 per cent in the second quarter, warned HSBC economists in a research note.

"Beijing should and will likely implement mini-stimuli, including accelerating public housing and subway construction, tax breaks for small and medium- sized enterprises," they added.

Li had ruled out a major stimulus package last month, although he unveiled measures such as tax breaks for enterprises.

At a press conference yesterday to discuss GDP results, statistics bureau spokesman Sheng Laiyun also highlighted that income growth - another top priority for Li - continued to outstrip GDP growth. Wages for farmers rose 12.3 per cent and urban residents' pay increased 9.8 per cent.

"Rather than the speed of growth, incomes and jobs are more important... so the (performance of) the first quarter is not bad," he said.

All this has boosted Beijing university student Allen Fang's optimism when he graduates in June.

"I'm moving to (the southern manufacturing hub of) Shenzhen, where there are more work opportunities because it is upgrading its industries to create more white- collar jobs," said the 22-year-old.


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