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.  
    REDROW RESULTS 07:35:
    Redrow houses

    Redrow says a large number of its Help to Buy clients were first time buyers and over half were in the north of England. It says its order book is looking plump - up 85% on last year. Business Live has been debating Redrow's building style. Ease of upkeep of the wooden bits has excited debate.

     
  2.  
    REDROW RESULTS 07:21:

    Housebuilder Redrow's results are here. The usual tale of rising prices and the government's Help to Buy scheme. Redrow reports a 13% increase in the average selling price to £239,500, record group revenues and record pre-tax profits (almost doubling). Help To Buy provided 35% of private completions.

     
  3.  
  4.  
    BORIS ISLAND 07:07:

    Sir Howard Davis, chairman of the commission, said it had come down against Boris's island airport plan because: "The economic disruption would be huge and there are environmental hurdles which it may prove impossible, or very time-consuming to surmount." Even the least-ambitious version of the scheme would cost £70-90bn."

     
  5.  
    BORIS ISLAND 07:04:

    "The Airports Commission has today (2 September 2014) announced its decision not to add the inner Thames estuary airport proposal to its shortlist of options for providing new airport capacity by 2030. Following detailed further study into the feasibility of an inner Thames estuary airport the commission has concluded that the proposal has substantial disadvantages that collectively outweigh its potential benefits." A firm no, as expected.

     
  6.  
    MARKETS 06:56: BBC Radio 4

    BlackRock is the world's largest asset manager with more than $4.5 trillion under management. Its investment boss Ewen Cameron Watt, discussing why markets are so steady in the face of so much global tension tells Today: "Volatility is exceptionally low by historical standards and there's too much money chasing too few assets."

     
  7.  
    HSBC SHARES 06:42: Radio 5 live
    hsbc

    Ewen Cameron Watt, Chief Investment Strategist of the BlackRock Investment Institute, is now on 5 live talking about the news Neil Woodford, the fund manager, flogged his HSBC shares. "Neil bought HSBC because it was one of the few banks where he thought there was some dividend growth," he says. However, fines in the sector are likely to drain that prospect, he says. It's fines "more than anything that's sapping bank's willingness too lend, or ability to lend".

     
  8.  
    MARKETS 06:27: BBC Radio 4

    Today is looking at why stock markets are at a 52-week high when the political situation around the world is so dire - there's the threat of war in Europe and conflict in the key oil producer Iraq. Ewen Cameron Watt, chief investment strategist at Investment Institute of giant asset manager BlackRock says: "At this stage in the summer months the thought that Russia might affect sending gas to Europe is not a worry. [Energy stocks] are about 90% of capacity."

     
  9.  
    BANKING COMPLAINTS 06:12: Radio 5 live

    More from the Financial Ombudsman's Caroline Wayman. Fee-paying bank accounts are the cause of the increase in complaints about banking, she says. "People are getting in touch saying they didn't know they had a fee paying account or want one." People are "more aware but we see a lot of people who are reluctant to raise concerns," when coming forward to the service, she says. There are also more complaints about payday loans, but from a low starting point she says.

     
  10.  
    BANKING COMPLAINTS 06:02: Radio 5 live

    Caroline Wayman, chief executive of the Financial Ombudsman Service is on Wake Up to Money talking about complaints about banks. Complaints about payment protection insurance have fallen by almost a third, but complaints about other things in banking are up: "Still a lot of people get in touch, more than 1,000 people a day," she says. "We've had to expand a lot."

     
  11.  
    06:01: Howard Mustoe Business reporter

    Morning! Get in touch via email bizlivepage@bbc.co.uk or via twitter @BBCBusiness

     
  12.  
    06:00: Rebecca Marston Business reporter, BBC News

    Good morning and welcome to Tuesday's Business Live. Stick with us for the pick of the morning's news.

     

Features

  • Ernest Hemingway, as war correspondent, travelling with US soldiers to Normandy for the D-Day landingsAbandoned hero

    Why Paris is forgetting Ernest Hemingway


  • Women doing ice bucket challengeChill factor

    How much has the Ice Bucket Challenge achieved?


  • Members of staff at James Stevenson Flags hold a Union Jack and Saltire flag UK minus Scotland

    Does the rest of the UK care if the Scots become independent?


  • Women in front of Windows XP posterUpgrade angst

    Readers share their experiences of replacing their operating system


From BBC Capital

Programmes

  • Art installationClick Watch

    How one artist is using computer code to turn internet radio into a unique piece of music

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.