China’s G.D.P. Slows to 7 Percent, the Weakest Rate Since 2009
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Version 0 of 1. HONG KONG — China’s economy grew in the first three months of 2015 at its slowest quarterly pace in six years, dragged down by an industrial slowdown and a weak housing market, the government announced Wednesday. Gross domestic product rose 7 percent from a year earlier, in line with economists’ forecasts. While the growth rate means China still ranks as one of the world’s fastest growing major economies, it marked the country’s slowest quarterly expansion since early 2009, when it was still feeling the effects of the global financial crisis. China’s Communist Party leadership has lowered its official growth target for this year to around 7 percent. This would be the nation’s slowest annual expansion in 25 years, but leaders have said this is a price that needs to be paid in order to reduce the economy’s reliance on credit-fueled growth and get everyday shoppers to spend more of their savings. Recent indicators suggest that the economy could be slowing more rapidly than many observers expected. In March, industrial production rose 5.6 percent from a year ago, its slowest increase since late 2008. Land purchases by real estate developers plunged 32 percent by area in the first three months of the year. Premier Li Keqiang told a forum of Chinese economists on Tuesday that economic performance in the first quarter “has a strong role as a weathervane,” according to a report in the Beijing News newspaper. The pace of growth in the first quarter “supported quite ample employment, and residents’ incomes have also risen in step,” the Beijing News said, summarizing Mr. Li’s comments. “But on the other hand we must see that downward economic pressure indeed continues to grow,” Mr. Li said. “Some of our traditional sources of strength are receding, and at the same time there are newly emerging sources of growth, and some sunrise industries are experiencing explosive growth.” For example, retail sales in March rose 10.2 percent, the slowest increase in nearly a decade. But online merchandise sales increased 41 percent in the first quarter, and now account for about 9 percent of all sales of consumer goods in China. Foreign trade, by contrast, has been buffeted by lackluster overseas shipments and signs of even weaker demand at home. Exports of goods by value rose only five percent in the first three months of the year, while imports slumped 17 percent, weighed down by lower global prices for oil and other commodities. The housing market continues to struggle, with home prices falling and new construction starts declining. This has far-ranging effects at home and abroad, including on domestic steel production, pricing of imported iron ore from Australia and the employment of sales agents at property brokerages across China. Sheng Laiyun, the spokesman for China’s National Bureau of Statistics, said that “downward pressure” on the Chinese economy came from both external factors, including the tepid recovery of many economies, and also from domestic factors. New sources of growth were emerging, he said, “but in the short term it’s difficult for them to make up for the subsiding of traditional drivers.” China’s leaders have responded to the slowdown by easing monetary policy but have held off from introducing more aggressive stimulus measures. Since November, the central bank has cut interest rates twice and freed up banks to lend more. Most economists expect further cuts in the coming weeks or months. These measures do appear to be having an effect, with key short-term borrowing rates in China’s money market, an important indicator of the real cost of funding for smaller banks and other financial institutions, falling to around 3 percent in the past week, down from around 5 percent in February. Despite this, there are still few signs that the government’s efforts at weaning the country off of credit fueled growth are succeeding. Total credit growth has slowed in recent months, but it is still outpacing G.D.P. growth, meaning China as a whole is growing more indebted. The biggest factor here continues to be the increase in corporate borrowing. In his remarks on Tuesday, Mr. Li emphasized that the government would persist with planned economic and financial overhauls despite slowing growth. “Our toolbox still has many policy tools, and the biggest tool is reform,” Mr. Li said. “There certainly is pressure now, and the pressure on some sectors is quite heavy. But there is also impetus, and many businesses take a positive long-term view of this market,” he added. |