China's First-Quarter GDP Growth Indicates Stabilizing of Economy
Zhou Ailin
DATE:  Apr 18 2019
/ SOURCE:  yicai
China's First-Quarter GDP Growth Indicates Stabilizing of Economy China's First-Quarter GDP Growth Indicates Stabilizing of Economy

(Yicai Global) April 17 -- China's better-than-expected first quarter economic data including industrial output, retail statistics and 6.4 percent  growth in gross domestic product indicate that the economy is stabilizing, according to analysts.

The purchasing managers' index and credit data were the main sources of  optimism for the economy as the GDP expanded one percentage point less  on a quarterly basis at 1.4 percent, Zhou Hao, senior economist at  Commerzbank, told Yicai Global.

Industrial  production data in March jumped 8.5 percent while retail sales data  also beat market expectations, and fixed asset investment remained  strong overall.

The industry and retail sales data rose annually  by 8.5 percent and 8.7 percent, respectively, against an anticipated  5.9 percent and 8.4 percent. The news generally confirms that China's  economic growth has bottomed out, said Xu Changtai, chief Asian market  strategist at JP Morgan Asset Management. The momentum for growth and  improved credit data will continue, and the easing of trade uncertainty  will also boost economic prospects, he added. 

The  data has improved from those of the first two months though some of  them were still weaker on an annual basis. For example, national fixed  asset investment (excluding farmers) was CNY10.2 trillion (USD1.5  trillion) in the first quarter, an annual rise of 6.3 percent, but down  1.2 percentage point from the same period of last year and up 0.2  percentage point compared with the first two months of 2019. 

Total retail sales of consumer goods increased 8.3 percent annually to CNY9.78 trillion, though the expansion was 1.5 percentage point short of  the same period last year and 0.1 percentage point higher than the  first two months of 2019. 

The import and export of goods climbed 3.7 percent annually to CNY7 trillion, and the rise was 3 percentage points higher than that of  January and February.

Given the recent data, the space for further easing monetary policy will be  limited in the short-term, Zhou said. Authorities will continue to  observe whether the current monetary policy can stabilize the economy,  and the possibility of a further reserve requirement ratio cut is  small. 

This year's basic tone of stabilizing economy will not change, Xu said.  However, the newly added stimulus policy requires further examination.  This year's GDP growth target is between 6 percent and 6.5 percent, and  the latest first-quarter data was close to the upper end of the range. 

China does not want to bring around another round of debt increases and the  deleveraging measures from 2017 stabilized the macro leverage ratio at a  certain level, Xu said. Thus, the central bank will be more patient  with regards to an RRR cut and may use other more low-key tools, he  added.

Editor: William Clegg

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Keywords:   GDP,Retail,Investment,Industrial production