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.  
    HEADLINES
    • Phones 4U 'assassinated' by networks says Caudwell
    • Calpers withdraws $4bn from hedge funds
    • ASOS shares slump after trading update
     
  2.  
    PHONES 4U COLLAPSE 08:09: BBC Radio 4

    The "ruthless actions" of mobile phone networks were behind the demise of Phones 4U says founder John Caudwell , who sold the business in 2006. It was an "unprecedented assassination" of the company by the networks which had partnered the firm for 20 years he said on the Today programme. The idea the Phones 4U managers "dug their heels in" during negotiations is "preposterous", he says adding "I simply don't believe Vodafone".

     
  3.  
    THOMAS COOK 07:56:
    The logo of travel agency Thomas Coo

    UK holiday operator Thomas Cook says it expects full-year earnings to the end of September will be in the range of £315m to £335m putting it broadly in line with analyst expectations. It added weaker prices, which it first warned about in May, continued but it had offset that impact by speeding up its cost-cutting programme.

     
  4.  
    CALPERS DUMPS HEDGE FUNDS 07:41:

    US pension giant Calpers is withdrawing all of its investments in hedge funds, blaming their expense and complexity. That's a cool $4bn (£2.4bn) leaving 30 hedge funds. Calpers, which stands for the California Public Employee's Retirement System, is the biggest public pension fund in the US.

     
  5.  
    Via Twitter Nick Bubb, retail analyst

    tweets: "Ouch....Q4 sales at ASOS weren't quite as bad as feared (+15%), but ASOS warn that there will be no profit recovery in y/e Aug 2015"

     
  6.  
    MAURICE LEVY 07:30:
    Mauricy Levy

    Maurice Levy, one of the most influential figures in advertising and in France, is to stand down as chairman of advertising giant Publicis in 2016. He is credited with turning Publicis into one of the world's biggest advertising agencies.

     
  7.  
    ASOS TRADING 07:18:
    ASOS

    Asos says that a fire at its Barnsley distribution centre in June resulted in lost sales of between £25m and £30m. But the online fashion retailer expects annual profit to still be in line with market expectations. Total first quarter sales rose 15%.

     
  8.  
    SCOTTISH INDEPENDENCE 07:05: BBC Radio 4
    pound coins

    What will happen to the currency on Friday it Scotland votes in favour of independence? George Godber of the fund manager Miton tells the Today programme that he can see "a very significant fall" in the value of the pound, maybe as much as 10% over about a week. That's because the UK's status as the fastest growing Western economy and a safe haven will be put in jeopardy, he says.

     
  9.  
    RUSSIA GAS 06:49: BBC Radio 4

    Europe could cope if Russia were to interrupt gas supplies in retaliation to European sanctions, says Malcolm Bracken of stockbrokers Redmayne Bentley. Norway can increase oil and gas production and gas reserves are in a pretty healthy shape, he says. Vladimir Putin needs money from the West more than he's letting on so we shouldn't be too worried about the effect of sanctions, says Mr Bracken on Today.

     
  10.  
    BUSINESS RATES 06:43:

    More than 100 of the UK's biggest companies, including Tesco and Marks & Spencer, have called for an overhaul of business rates. In an open letter to the Daily Telegraph they say business rates "are no longer fit for purpose for the 21st century". The tax brings in £25bn for the Treasury annually.

     
  11.  
    OIL PRICES 06:35: BBC Radio 4

    Brent Crude fell below $97 a barrel on Monday for the first time in two and a half years. Malcolm Bracken of stockbrokers Redmayne Bentley explained the fall on the Today programme. "There's been a slowdown in China, cars are becoming more efficient, the war premium is falling, sanctions haven't really had an effect on oil production in Russia and money is tightening," he says.

     
  12.  
    ALIBABA SHARE SALE 06:20: Radio 5 live
    Alibaba head office, Hangzhou

    Alibaba has raised the price range of shares in its US stock market debut and could now raise $25bn (£15.4bn). The funds will allow the Chinese internet company "to make its mark" in the US market place says BBC Business presenter Rico Hizon on Wake Up to Money. Company executives are on an international road show to market the shares. Today there are in Singapore, tomorrow London.

     
  13.  
    SCOTTISH INDEPENDENCE 06:12: Radio 5 live
    Scottish flag

    The leaders of the three main parties at Westminster have signed a pledge to devolve more powers to Scotland, if Scots reject independence. On Wake Up to Money Colletta Smith, the Economics Correspondent for BBC Scotland says it amounts to an "agreement to make some kind of agreement". Details will have to be worked out after the vote, she says.

     
  14.  
    PHONES 4U COLLAPSE 06:02: Radio 5 live
    Phones 4U

    "I'm not surprised it fell over," says fund manager, George Godber in reference to the failure of Phones 4U over the weekend. On Wake Up to Money Mr Godber says the company did "not have any room for financial manouevre" because its private equity owners had recently loaded it with £250m in debt. Phones 4U founder John Caudwell will be on Radio 5 at around 08:45.

     
  15.  
    06:00: Matthew West Business Reporter

    Morning folks as always you can get in touch with us here at bizlivepage@bbc.co.uk and on twitter @bbcbusiness.

     
  16.  
    05:59: Ben Morris Business Reporter

    Good morning. It's shaping up to be a busy morning with inflation figures due at 09:30 and we'll see what John Caudwell has to say about the demise of the company he founded, Phones 4U. Stay with us.

     

Features

From BBC Capital

Programmes

  • Click reporter Jen Copestake looks at a smart mirrorClick Watch

    From the mirror offering beauty advice to next gen robot vacuums - the connected home of the future

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.