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China's economic growth slows

Jul 13 2012 10:07 AFP

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Beijing - China's economy expanded at its slowest pace since the depths of the global financial crisis more than three years ago, official data showed on Friday, fuelling expectations of more stimulus moves.

The world's second-largest economy grew 7.6% from April to June year-on-year, the National Bureau of Statistics said, the worst performance since 6.6% in the first quarter of 2009.

The slowdown "was mainly due to the continued deterioration in the international environment, which further dampened foreign demand," statistics bureau spokesperson Sheng Laiyun told reporters.

"Domestic demand eased also as macro-economic tightening, particularly controls on the real estate sector, continued."

The weak second-quarter expansion dragged down growth to 7.8% for the first half of the year.

Sheng expressed confidence that the economy would stabilise and China would meet its full-year growth target of 7.5%.

"I believe China's economy will continue moderate and steady growth in the second half of the year," he said, citing the potential for investment, consumption and exports to propel expansion the rest of the year.

"We are very confident in achieving the full-year growth target."

Nevertheless, the target growth rate of 7.5% is well down on the 9.2% achieved last year, and 10.4% in 2010.

Market reaction in China to Friday's data was muted. Chinese stocks turned slightly into negative territory after initially rising following the release of the figures.

The Shanghai Composite Index, which covers both A and B shares, was down 0.15%, or 3.30 points, to 2,182.19 in late morning.

Tang Jianwei, economist at Bank of Communications in Shanghai, said the second-quarter result was in line with expectations and that China's planners would be able to speed up the economy.

"We expect economic conditions in the second half of the year will be slightly better than the first half," Tang said.

"We've already seen stabilisation in investment from June's data thanks to government stimulus policies."

The government last week took the rare step of slashing interest rates for the second time in a month. That came after three cuts since December in banks' reserve requirements, or the amount of money they must keep on hand.

Such cuts are meant to free up funds for lending and thus boost the economy.

Chinese leaders have vowed to take further measures. Premier Wen Jiabao this week called stabilising economic growth the government's "top priority".

Slowing growth in China is also casting a further cloud over the broader global economy, which is still suffering the effects of the 2008-2009 financial crisis.

Employment figures in the United States, the world's biggest economy, remain weak and Europe is struggling to overcome its sovereign debt crisis.

Ren Xianfang of IHS Global Insight said in a report that China's second-quarter figure marked the sixth straight three-month period of slower growth, and highlighted that the country's economy risked losing momentum.

Still, she said that the government retained ample tools - including another interest rate cut, more loosening in bank reserve requirements and exchange rate stability - to spur activity.

"We are expecting about 7.9% growth this year," she said.

Besides the growth figures, the bureau released a slew of other economic statistics on Friday that backed up the broader slowdown.

Growth in retail sales, the main gauge of consumer spending, continued to slow in June, rising 13.7% in June compared with the same period a year earlier, marginally down from growth of 13.8% in May.

Output from China's millions of factories and workshops also continued to slow, growing by 9.5% year-on-year in June, the bureau said, down from 9.6% in May.

However, indicating that some government measures to revive growth were starting to kick in, China's urban fixed asset investments rose 20.4% in the first half of 2012 compared with a year earlier, the bureau said.

The investments for the half year compared with growth of 20.1% in the first five months of the year, signalling a slight increase in June.

Fixed asset investments are a key measure of government spending on infrastructure.

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