BEIJING (AFP) – China announced its slowest growth in at least a decade on Thursday, but Premier Wen Jiabao said the world’s number three economy was performing better than expected.
The Asian giant posted growth of 6.1 percent in the first quarter of the year, down from 6.8 percent in the final three months of 2008, underlining the impact of the global crisis.
But overall, the economy was in “better-than-expected” shape and government stimulus measures were starting to show results, Wen told a Cabinet meeting, according to the state-run Xinhua news agency.
China in November launched a four-trillion-yuan (580-billion-dollar) stimulus package to combat the global economic crisis, and some analysts agreed that the impacts were starting to be felt.
Most strikingly, urban fixed asset investments rose 28.6 percent in the first quarter, whereas in March alone the increase was 30.3 percent year-on-year, the National Bureau of Statistics said.
And while industrial output expanded by just 5.1 percent in the first quarter of 2009 from a year earlier, it heated up to 8.3 percent in March, according to the bureau.
Standard Chartered economist Stephen Green said China’s economy had bottomed out in the first quarter, and that the stimulus package was likely to see at least another two quarters of strong investment growth.
“It looks like we’ve already started to gain some forward momentum,” he said.
Yu Song, an analyst with Goldman Sachs, also said China’s economy could be on the up.
“The policy stimulus effects have come even earlier and stronger than we previously expected,” Yu said in a research note.
Even so, the National Bureau of Statistics, sounded a note of caution.
“The national economy is confronted with the pressure of a slowdown,” Li Xiaochao, the bureau’s spokesman, told reporters.
“The foundation is still not solid and we still have a daunting task in the coming period.”
He said problems included a decline in exports, a drop in corporate profits and unemployment.
The first quarter cool-down followed nine percent economic growth for all of 2008, reinforcing concerns that China this year will experience its slowest economic expansion in 19 years.
Officials have stressed that China’s economy needs to grow by about 8.0 percent this year in order to prevent social unrest triggered by widescale unemployment.
Before the global economic crisis struck, China had experienced double-digit growth from 2003 to 2007.
“The quarterly growth was the slowest in the past 10 years as the global financial crisis continued to affect the world’s fastest-growing economy,” Xinhua reported.
Historical data from Beijing statistical authorities are patchy, but Goldman Sachs said growth in the first quarter was actually the slowest since data began being recorded in 1992.
Against this backdrop, Standard Chartered’s Green warned the signs of better times were still tenuous.
“The key is whether the consumer keeps spending and whether the private sector starts to invest,” he said.
“Those are the two key things that we need to happen for this recovery to be sustainable.”
And despite the signs of a pickup, worldwide economic woes have left China facing deflation, just a year after it was concerned inflation might be too high.
The consumer price index (CPI), which measures the cost of living and is China’s main gauge of inflation, fell 0.6 percent in the first quarter of 2009 from a year earlier, according to the bureau.
In March the CPI was down 1.2 percent from a year ago. Compared with February it fell 0.3 percent, the bureau said.
The first quarter data had very little impact on China’s stock market, with shares edging down just 0.08 percent on Thursday.