China: Economic growth remains buoyant at the outset of 2011
April 15, 2011
In the first quarter, GDP expanded 9.7% over the same period last year. The reading represented a slight moderation from the 9.8% expansion registered in the fourth quarter of the previous year, but beat market expectations, which had seen growth moderating further to 9.4%. Unexpectedly, economic growth in China remains resilient at the outset of this year, despite authorities' efforts (both political and monetary) to prevent the world's second largest economy from succumbing to overheating risks and rising inflation, which threaten to disrupt social stability. Chinese policymakers adopted several actions to tame its buoyant economy throughout 2010, including raising the reserve requirement ratio, hiking interest rates, and a series of measures to cool the housing market. Analysts expect that China will maintain its restrictive policy this year. According to the National Bureau of Statistics (NBS), investment continued to be the main economic growth engine, while consumption slowed somewhat. In the first quarter, urban fixed-asset investment, which includes capital and construction investment, accelerated from 23.9% in the fourth quarter of 2010 to 25.0% in nominal terms, while retail sales slowed from 18.8% to 16.3% in the same period. On the other hand, net exports contributed negatively in the first quarter, as the trade balance registered its first shortfall since Q1 2004. While exports of goods and services gained 26.5% in Q1, this expansion was more than offset by the 32.6% advance of imports. Meanwhile, for the first time, the NBS unveiled quarter-on-quarter figures adjusted by seasonal factors, another step towards a more homogeneous comparison base with other major economies, although the statistical office did not release a historical series. Under this new measure, GDP expanded 2.1% over the previous quarter, or 8.7% on an annualized basis, suggesting that the growth momentum may be slowing as some analysts see the seasonally adjusted annualized rate of expansion at around 10% in the fourth quarter. The National Development and Reform Commission (NDRC) currently expects economic growth to slow to 8% this year and to close at 7% in the 2011-2015 period, according to the 12th Five-Year Plan.