[image: Need a Real Sponsor here] APRIL 16, 2009 China Growth Slowed to 6.1% in Quarter<http://online.wsj.com/article/SB123984767545423661.html#mod=rss_about_china>
By TERENCE POON<http://online.wsj.com/search/search_center.html?KEYWORDS=TERENCE+POON&ARTICLESEARCHQUERY_PARSER=bylineAND>and ANDREW BATSON<http://online.wsj.com/search/search_center.html?KEYWORDS=ANDREW+BATSON&ARTICLESEARCHQUERY_PARSER=bylineAND> BEIJING -- China reported its worst quarterly economic growth in nearly two decades, but also published other data indicating that the deepest part of the downturn may have already passed amid a huge wave of government spending. The 6.1% rise in first-quarter gross domestic product -- roughly in line with economists' expectations -- was lower than the 6.8% expansion in the fourth quarter of 2008, and marks a significant slowdown from past growth that hit 13% for the full year of 2007. With exports declining and companies sharply cutting inventories this year, quarterly growth has already fallen below the lows reached during the Asian financial crisis. So China's current slump is easily its worst since the downturn of 1989-1990, when the economy grew by only about 4% a year. Yet some indicators continued to pick up in March, as the government's drive to boost investment took hold. "There have been some positive changes, and the result is better than expected. But the foundation is not yet solid and the task ahead is still arduous," said Li Xiaochao, spokesman for the National Bureau of Statistics, as he announced the figures in Beijing. He said China faces challenges both internationally, from a world economy that is still in recession, and domestically, from the need to maintain jobs and incomes for its vast population. But Mr. Li also cited improvements in key indicators as reasons for confidence. Fixed-asset investment in urban areas, China's benchmark measure of capital spending, rose 30.3% in March from a year earlier, picking up from 26.5% growth in the first two months of this year -- an indication that stimulus projects are coming online. And industrial production, the main driver of China's manufacturing-heavy economy, grew by 8.3% in March from a year earlier, accelerating from the 3.8% gain in January and February. The world's third-largest economy is being closely watched by investors for signs it will recover before crisis-stricken Western nations. Demand from China could provide support to export-dependent Asian nations such as Singapore and Japan, whose economies are contracting sharply. Producers of iron ore, copper and oil, from Australia to Latin America to the Middle East, are looking to China's stimulus program, worth four trillion yuan or around $585 billion, to drive commodities demand. At the least, the first quarter is likely to be the slowest growth pace China will see this year. "It's not going to get worse," said Calyon economist Sebastien Barbe. And there are already hopes for an early recovery in China, based on the government's stimulus plan and its orders to banks to massively expand lending. [image: [China's GDP]] "The stimulus policies -- both fiscal and credit expansion -- led by the government are certainly the main driver of the rebound," said UBS economist Wang Tao. "The first quarter is only the start. The second-quarter rebound will be even stronger on a sequential basis." Breaking down the GDP figures relative to the previous quarter -- which is how most developed economies report their economic data -- provides more evidence of improvement. China's 6.1% figure for the first quarter of 2009, because it is a comparison only with the year-earlier period, doesn't clearly show how the economy is doing relative to the onset of the crisis late last year. Many economists think economic growth probably accelerated in the first quarter from the last quarter of 2008, a change that wouldn't be captured in that headline figure. Private-sector estimates varied, but were generally in the range of a 5% to 7% increase in first quarter GDP on an annualized, seasonally adjusted comparison with the previous quarter, versus much weaker growth of around 1% to 2% in the fourth quarter. The statistics bureau's Mr. Li said bureau officials are working on their own such calculations but are unlikely to publish them until next year. Merrill Lynch economist Lu Ting went as far as to say that China is the first major economy to recover from the global downturn. Other observers were more tempered. "So far, the recovery is quite narrow," said Macquarie Securities analyst Paul Cavey, since growth now is being mainly driven by bank loans and spending on infrastructure. Despite early signs of a recovery in real estate, which could fuel construction, he warned that "the story isn't complete." The stimulus has been supported by consumer spending that has been surprisingly resilient during the global downturn. Car sales hit a monthly record in March, and home purchases and air travel both have been rising this year after sharp falls last year. In March, retail sales rose 14.7% from a year earlier, down only slightly from a 15.2% rise in January and February. Still, concerns about deflation and excess capacity in manufacturing persist as prices continue to fall. China's consumer price index for March fell 1.2% from a year earlier, the statistics agency said, after a drop of 1.6% in February and a 1.0% gain in January. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. 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