China first-quarter growth slows to 6.7%: Survey

A street cleaner walks by the bund near the Huangpu river across the Pudong New Financial district, in Shanghai.
A street cleaner walks by the bund near the Huangpu river across the Pudong New Financial district, in Shanghai. PHOTO: AFP

BEIJING (AFP) - China's growth slowed further in the first three months of this year, economists polled by AFP forecast, even as authorities step up policy support for the world's second-largest economy.

Gross domestic product (GDP) rose 6.7 per cent year-on-year in January-March, according to the median projection in a survey of 19 economists, down marginally from 6.8 per cent in the previous three months.

The government is scheduled to announce its first-quarter growth figures on Friday (April 15).

China is a key driver of global growth and its shipments of finished goods, along with its demand for the resources to manufacture them, affect nations across the world.

Expansion in the Asian powerhouse slowed to 6.9 per cent for all of last year - its weakest in a quarter of a century - as it grapples with a difficult transition from dependence on heavy state investment and cheap exports to consumer-driven growth.

Growth will further weaken this year, the survey projected, with a median prediction of 6.6 percent for 2016 - towards the bottom of the government's target range of 6.5-7.0 per cent.

Concerns over the Chinese economy have roiled global markets while ratings agencies Moody's and Standard & Poor's last month lowered their outlooks on the country's sovereign bonds.

China was experiencing a "continued downward grind in industry and construction", Brian Jackson, Beijing-based China economist at IHS Global Insight, told AFP.

The stock market boom in the first half of 2015 - before the bubble burst in spectacular fashion - would also drag on the figures, he added.

"Last year, China got a big boost from finance," he said. "This year, the year-on-year comparisons are going to be quite unfavourable."

But in recent weeks there have been signs of recovery following government fiscal and monetary loosening measures, analysts said.

China's central bank last month cut the proportion of funds lenders must set aside as reserves, in an attempt to tackle slowing growth.

And in early February it lowered the minimum mortgage down-payment in some cities to 20 per cent from 25 per cent, days before the finance ministry cut taxes on property purchases. The move came as the government sought to reduce a supply glut in the key real estate sector - which is crucial to industries such as steel and cement.

Real estate sales have been recovering, with new home prices in 100 major Chinese cities rising 7.41 per cent year-on-year in March on average, accelerating from an increase of 5.25 per cent in February and 4.37 per cent in January, figures from the China Index Academy showed.

Chinese manufacturing activity also expanded in March for the first time since mid-2015, while on Wednesday data showed exports soared 11.5 percent in March, beating expectations.

"It seems like the economy showed signs of stabilisation in March because the government loosened fiscal policy more than we expected," said Wendy Chen, a Shanghai-based economist with Nomura International, told AFP.

Reflecting improving sentiment, China's foreign exchange reserves rose US$10.3 billion to US$3.21 trillion at the end of March, reversing four months of decline as the flood of money leaving the country eased.

Wang Tao, a Hong Kong-based economist at UBS, said in a research note that Beijing's recent moves "underscored policymakers' determination to use as much policy support as needed to prevent a sharper slowdown and achieve its above 6.5-per cent GDP growth target".

Increasing prosperity is a key part of the Communist Party's claim to legitimacy in China, and authorities are keen to avoid the social unrest that could accompany large-scale unemployment.

Worries over joblessness have been mounting this year after the government said it would lay off around 1.8 million workers in the steel and coal sectors as it seeks to restructure lumbering state-owned enterprises.

Thousands of workers at a northeastern coal mine went on strike last month over months of unpaid wages.

Shen Jianguang, an economist with Mizuho Securities Asia in Hong Kong, said authorities were loosening policy to try to avert mass unemployment.

"Overcapacity, without stimulus, could turn into (factory) shutdowns and layoffs," he told AFP.

Analysts cautioned recent positive signs were mainly driven by government interventions and uncertainties remained, such as prospects for exports and economic reforms.

"Factors that restrain China's economy haven't been eradicated," said Lu Zhengwei, an economist at Industrial Bank.

"If the loosening policies are withdrawn, then the economy will be no good."