Business / Economy

Data reflecting soft Q1 GDP growth, bank says

By Emma Dai in Hong Kong (China Daily) Updated: 2014-03-28 08:45

"This is fairly low for China," Lo said, adding that the average rate for the past few years had been about 24 percent. Last year, such investment grew 19.6 percent.

The NPC said retail sales will pick up 14.5 percent this year, compared with 13.1 percent in 2013. But Lo said the sector faces challenges.

Data reflecting soft Q1 GDP growth, bank says

China's GDP growth target for 2014 set at 7.5 percent

Infographic: Five key words from Li's govt report

"This might be too optimistic in the short term. It takes longer to boost domestic consumption," she said. Lo said that shoppers are reacting to reforms of the pension system and social welfare programs, as well as the urbanization process, where policies will take at least three to five years to achieve a real change.

"The central government's heavy hand on corruption will continue to affect high-end consumption, especially businesses in the food and beverage sector." Exports will be "lukewarm" in the short term, Lo added.

"Although demand from European and US buyers is gradually picking up, we are not expecting solid growth until the second half, especially on the high comparison base of the first half of last year."

However, an economist from the Australia and New Zealand Banking Group Ltd said growth prospects won't be "harsh" if monetary policy is eased.

"As indicated by the HSBC Holdings Plc purchasing managers' index, China's economy" shows signs of bottoming out, said Liu Ligang, greater China chief economist of the bank, adding that data should turn better later in the year, although the first quarter will be "poor." The bank estimates first-quarter GDP growth of 7.2 percent.

HSBC released the flash China PMI for March on Monday, showing manufacturing activity at an eight-month low of 48.1. The new export orders sub-index, however, was 51.5, a level indicating expansion.

"It depends on whether the government can follow up. We expect a more accommodative monetary policy," Liu said. He added that the central bank could cut the reserve requirement ratio with "window guidance" pushing support for smaller companies while applying strict loan quotas to industries with excess capacity.