China's economy grows 7.4% in 2014 Q1, better than forecast

 
National People's Congress exterior Chinese leaders are pushing for reforms to boost growth at home

China's economy expanded by 7.4% in the first quarter of the year, better than what many were expecting.

But it is a slowdown from 7.7% growth in the final quarter of last year.

Other data released with the gross domestic product (GDP) figure showed industrial output rising 8.8% in March from one year ago.

Retail sales for the month of March spiked by 12.2%, underscoring China's efforts to boost economic growth via domestic consumption.

Last year China set its growth target for 2014 at 7.5%, part of efforts to stabilise the economy after years of fast-paced expansion.

China's growth data is closely watched around the region. A slowdown could hurt Asian economies especially those which export commodities and industrial components to the world's second largest economy.

Quality vs Quantity

China's Premier, Li Keqiang, is trying to downplay the fixation on GDP figures in the world's second largest economy. He's now stressing that the quality, rather than the quantity, of growth is what is important.

China's leaders have said they will tolerate slower growth while they push through major economic reforms which are designed to create new, better-paying jobs. There is the realisation that the old economic model, dependent upon investment-led growth and exports, has now run out of steam.

The leadership wants to see more domestic consumption to create more sustainable growth over the long-term. It wants the private sector to play a bigger role. But in any economic shake-up, there will be winners and losers.

Implementing the reforms will mean tackling entrenched economic interests - such as state-owned enterprises - that have gobbled up resources and done very well out of the old way of doing things.

In recent weeks, the government has announced a mini-stimulus to prop up flagging growth. But it has ruled out the type of the massive stimulus which jolted China's economy back to life following the global financial crisis.

Despite the challenges, the governments hopes to post growth of around 7.5% for this year.

A sluggish start for the year is not uncommon, due to the Lunar New Year holiday when many businesses and factories shut down operations for about two weeks.

But recent data from the manufacturing as well as industrial sectors have been weak, raising fears of a prolonged slowdown.

Economic boosters

Amid these concerns, China has recently taken more steps to give a jolt to its economy.

A mini-stimulus measure announced earlier this month will see Beijing extending a tax break for small and medium-sized companies, and ramping up spending on China's railway infrastructure.

In addition, the mainland also took steps to open up its capital markets by announcing a tie-up with Hong Kong, allowing for cross-border stock investment. The pilot scheme is scheduled to take off in about six months.

And in January, China launched a free-trade zone in Shanghai, seen as a test bed for reforms in key areas of the economy, such as the financial and telecom sectors which previously were tightly controlled by the government.

China also said it will allow foreign firms to make gaming consoles within the free-trade zone and sell them across China - lifting a ban on gaming consoles which had been in place since 2000.

Yuan counting China doubled the daily trading band for its currency this year to 2%
Bottoming out?

Analysts are hopeful that the Chinese economy has bottomed out, and will perform better later in the year.

Julian Evans-Pritchard from Capital Economics said: ``Chinese growth held up better than expected last quarter and there are signs that downwards pressure on growth has eased somewhat.''

Start Quote

It is an open question as to whether China can create the seven million jobs a year needed for its new graduates ”

End Quote

"While Q1 GDP growth slowed, we believe that the growth momentum has stabilised in March. Port throughput data and our field study also suggest that China's trade may have bottomed out, and will become more resilient than what the current headline numbers suggest," said Zhou Hao who covers the Chinese economy for ANZ in Shanghai.

China's trade figures for March had shown a sharp drop in both imports and exports.

Earlier this month the World Bank lowered its growth forecast for the Chinese economy this year to 7.6% for this year from a previous prediction of 7.7%.

 

More on This Story

Global Economy

Comments

This entry is now closed for comments

Jump to comments pagination
 
 

Comments 5 of 159

 

More Business stories

RSS

BBC Business Live

  1.  
    09:30: UK GDP

    The UK economy grew by 0.7% in the three months to September, in line with City forecasts, official figures show. In the previous three months the economy grew by 0.9%. The first three months of the year were initially estimated to have seen growth of 0.8% but that was recently revised back down to 0.7%.

     
  2.  
    09:21: TSB EARNINGS

    TSB shares are up 1.8% in London to 263.70p. Numis analyst Mike Trippitt says the bank's profit beat his estimates in a note to clients. Impairments were lower than the market thought and costs were better.

     
  3.  
    09:07: SPIRIT PUBS TAKEOVER
    pub

    More analysis on Greene King and C&C's offers for the Spirit pub chain. "The really interesting development, in our view, would be for all three businesses to combine. The result would be a leading pubco and a brewer, cider maker and distributor with a much stronger portfolio of brands," say analysts at City broker Canaccord Genuity this morning. "C&C also own Tennents, the leading Scottish lager. Belhaven (Greene King's Scottish estate) is a leading customer."

     
  4.  
    08:51: BANK OF DAVE Radio 5 live

    Dave Fishwick, the minibus salesman who founded the "Bank of Dave" is on Radio 5 live. What does the banking market need? "What we desperately need out there is challenger banks," he says. What's also needed is "tighter control of the bigger banks to prevent greed and corruption," he adds.

     
  5.  
    08:36: MARKET REPORT

    The fallout from Tesco's results yesterday continues today. The supermarket is the biggest faller on the FTSE 100 Index so far this morning down 2.3% to 167.05p. European markets are down generally. The FTSE 100 is down 0.45% to 6390.17, Germany's Dax is down 0.40% to 9011.29 and France's Cac-40 has fallen 050% to 4136.95.

     
  6.  
    08:23: PEARSON EARNINGS
    penguin

    Pearson's chief executive John Fallon says the firm's £50m cost-cutting programme is on track and "momentum in digital, services and emerging market education is building, which will drive a leaner, more cash generative, faster growing business from 2015."

     
  7.  
    08:06: SPIRIT PUBS TAKEOVER

    Could this be the beginning of a bidding war? The pub chain has said it has rejected a takeover proposal from Irish cider maker C&C Group today. Spirit is already in talks with brewer and pub owner Greene King about its proposed £723m takeover offer. C&C, the maker of Magners and Bulmers, has until 20 November to announce a firm takeover offer.

     
  8.  
    07:51: PEARSON EARNINGS

    Pearson has reported flat underlying revenue for nine months to the end of September and a 1% fall in in what it calls headline growth for the period. It blames the strength of sterling against key emerging market currencies for the fall. Penguin Random House has performed well in the third quarter, it adds without giving detail. It says the integration of its businesses is "progressing well and is on track to deliver benefits in 2015 and beyond".

     
  9.  
    07:38: HIKMA WARNING

    Hikma Pharmaceuticals says it has received a warning letter US Food and Drug Administration after an inspection at its manufacturing plant in Portugal. "In the letter, the agency raised issues related to investigations and environmental monitoring at the facility," said the firm, which is taking the letter "very seriously."

     
  10.  
    07:26: TSB EARNINGS
    The TSB logo

    Impairments - that is, bad loans - fell to £23m from £32.2m, said TSB. Loans rose 7.7% to £22bn compared to a year ago, but fell from a peak of £23bn six months ago. TSB won 9.7% of all new or switched bank accounts, it said, adding £500m of deposits.

     
  11.  
    07:18: PEARSON FINANCE CHIEF STEPS DOWN

    Robin Freestone, chief financial officer of Financial Times and Penguin Random House owner Pearson has announced he is standing down after 10 years with the firm, including eight in his current role. He will probably leave the firm in 2015 after a successor has been found, said the firm.

     
  12.  
    07:08: TSB EARNINGS

    TSB third-quarter profit before tax fell 14% to £33.1m compared with the same time a year ago, after operating expenses rose. But revenue swelled 18% to £199m

     
  13.  
    06:54: EU PAYMENT Radio 5 live

    Sarah Hewin of Standard Chartered on 5 live says the payment has to be made in the next few months. That could mean more borrowing, she says.

     
  14.  
    06:41: EU PAYMENT Radio 5 live
    British Prime Minister David Cameron

    Sarah Hewin of Standard Chartered is explaining why the UK has to pay an extra £1.7bn to the EU on 5 live. "The UK has been doing better since 1997 than we thought and that's resulted in this extra payment. The Netherlands will pay more, while France and Germany get a rebate."

     
  15.  
    06:29: AMAZON RESULTS Radio 5 live

    Paul Kavanagh of wealth manager Killik is talking about Amazon's loss-making results last night. "It begs the question about what is happening here with this strategy. The shares fell 11% in after hours [in the US]." Investors may be growing tired of ever-more sales expansion with little profit to show for it, he tells 5 live.

     
  16.  
    06:20: CHALLENGER BANKS Radio 5 live

    Paul Kavanagh of wealth manager Killik says it's difficult for banks to persuade customers they offer something new. When a challenger bank succeeds, the larger banks often take the best ideas, he says on 5 live.

     
  17.  
    06:12: CHALLENGER BANKS Radio 5 live

    Steve Davies is still on 5 live. He says challenger banks are forcing their larger competitors to think more about the customer and service - think Metro bank opening on Sundays. Competing on rates is more difficult, he says. TSB results coming up later.

     
  18.  
    06:03: CHALLENGER BANKS Radio 5 live

    Steve Davies of accountants PwC is on 5 live talking about so-called challenger banks. Can they challenge the largest high street banks? "They have to be able to offer something a little bit different," he says. "The challenge is around innovation," he says. Customer is key, he adds.

     
  19.  
    06:00: Howard Mustoe Business reporter

    Good morning. Get in touch via email blizlivepage@bbc.co.uk and twitter @BBCBusiness.

     
  20.  
    06:00: Matthew West Business reporter

    Morning folks. It's Friday, we're nearly at the weekend. But before that, TSB kicks off bank earnings season and Shire has financials out as well. There's also some service sector data but the big bit of data is the first estimate of third quarter GDP. We'll bring you it all as it happens as always.

     

Features

From BBC Capital

Programmes

  • The smartphone that answers backClick Watch

    Smartphones get smarter – the prototypes that talk and say ouch when you drop them

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.