Chinese GDP gauge shows much deeper slowdown

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br CHINA-_0415 Reuters Visitors flock to the Shanghai International Business Aviation Show at Hongqiao International Airport yesterday. Quarter-on-quarter data due out today are expected to show China's growth momentum bottomed out in the first quarter. Photo: Reuters

Beijing - China’s loss of economic momentum in the first quarter was deeper than widely cited data will show, according to analyst forecasts for a gauge that is gaining greater recognition.

Gross domestic product (GDP) grew 1.5 percent from the previous three months, according to the median estimate in a survey ahead of data to be released today, down from 1.8 percent in the fourth quarter – a sharper deceleration than the median projection for 7.3 percent year-on-year growth, down from 7.7 percent.

Investors are focused on the slowdown that prompted Premier Li Keqiang to provide what some analysts dubbed a “mini-stimulus” of spending and tax relief. While the indicator suffers from flaws, including the government’s failure to give details of methodology, it provides an extra tool to analyse an economy that bond fund manager Bill Gross calls the “mystery meat” of emerging markets.

“The quarter-on-quarter data will show growth momentum bottomed out in the first quarter,” said Chen Xingdong, the chief China economist at BNP Paribas. The measure “has clearly captured the changes in growth momentum”.

People’s Bank of China data released yesterday showed the broadest measure of new credit fell 19 percent from a year earlier and money supply grew at the slowest pace on record, underscoring risks of a deeper slowdown as the government tries to curb financial dangers.

“More private-sector economists are giving estimates and paying attention to it,” said Andrew Polk from The Conference Board, a US research group. At the same time, the indicator had limitations, he said.

Lu Ting, the head of Greater China economics at Bank of America in Hong Kong, said “frequent major revisions” and seasonal-adjustment difficulties curtailed the data’s reliability.

International companies are still betting on China for growth. Hennes & Mauritz, Europe’s second-biggest clothing retailer, is expanding into the nation’s smaller cities. Daimler said this month that the maker of Mercedes-Benz cars would add 100 dealerships for a network of 400 outlets in the country by the end of this year.

The outlook may partly depend on how officials cope with financial strains after the onshore yuan bond market had its first default, by Shanghai Chaori Solar Energy Science & Technology.

China has yet to give annualised figures for sequential quarterly growth, which would result in figures that are more volatile than year-on-year numbers. Bloomberg data based on the government’s figures showed annualised growth last year of 6.1 percent in the first quarter, followed by 7.4 percent, 9.1 percent and 7.4 percent.

“It looks less attractive for the government than year-on-year, which is stable and almost always above 7.5 percent,” said Tom Orlik, an economist with Bloomberg and the author of Understanding China’s Economic Indicators. – Bloomberg


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