Reforms trump growth for China

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br _MARKETS-IRONORE Reuters A truck drives past piles of iron ore at the dump site of a port in Rizhao, China. Growth in gross domestic product in the top consumer of iron ore and steel probably slowed to 7.3 percent in the first quarter, economists have estimated, as Beijing prioritises economic reform over growth. File picture: Reuters

Beijing - China’s economic expansion slowed in the first three months of this year, according to a survey of economists, and remains on track for its worst annual performance in almost a quarter of a century as reform priorities trump growth concerns.

Gross domestic product (GDP) in the January to March period expanded 7.3 percent year on year, according to the median forecast in a survey of 13 economists.

The National Bureau of Statistics is due to release GDP data for the first quarter tomorrow.

Such a result would mark the fourth slowdown in the past six quarters. It comes as the government signals a willingness to accept weaker growth, as the economic model pivots away from decades of double-digit expansion fuelled by big-ticket investment projects.

Now, authorities say they want consumer spending and other forms of private demand to propel the economy into a future of more sound and sustainable growth, though they are quick to emphasise that rebalancing must not come at the expense of jobs.

China’s ultimate success or failure in retooling its economic model has broad implications for the rest of the world, which has come increasingly to rely on it as a driver of global growth as the West emerges slowly from the 2008 financial crisis.

Tang Jianwei, an economist with Bank of Communications, said authorities would be careful to strike a balance between supporting growth and pushing reform, but would avoid large-scale stimulus. “The focus is still on reform,” he said.

Last month China set its annual growth target for this year at about 7.5 percent, the same as last year. But officials, including Premier Li Keqiang, have been quick to stress that the target is flexible – seen as a hint it may not be reached.

Li said authorities were focusing on how growth contributed to improving livelihoods, stressing growth “needs to ensure fairly full employment and needs to help increase people’s incomes”.

The last time China missed the growth target was in 1998 during the Asian crisis.

GDP grew 7.7 percent last year, the same result as 2012, which was the worst pace since 7.6 percent in 1999.

The last time annual growth came in below 7.6 percent was 1990 – the year after the Tiananmen Square crackdown when China was hit by international sanctions and GDP grew just 3.8 percent.

For the full-year 2014, the median forecast in the survey is for an expansion of 7.4 percent.

The International Monetary Fund believes China is on course for medium-term growth “substantially below the 10 percent average rate… during the past 30 years”. In a report last week, it predicted GDP would grow 7.5 percent this year and 7.3 percent next year. – Sapa-AFP


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