China, often referred to as the global growth engine, is set to see a further slowdown in the pace of economic growth in the first quarter. The slowdown is likely to be broad based, spanning across all segments of the economy, Exports, accounting for over 30 percent of GDP growth, are slowing as the global economy swirls under the maelstrom of a fragile recovery and the debt crisis in Europe. Meanwhile, offsetting strength hasn't emerged from domestic demand as well.
Earlier in March, when the Chinese government trimmed its GDP forecast for 2012, global markets reacted with panic. The Dragon nation now estimates GDP growth of 7.5 percent for the year, which by global standards is fairly robust, but pales in comparison with the past growth statistics of the nation or with that of the other BRIC nations.
The Chinese GDP is expected to grow 8.4 percent year-on-year in the first quarter, the weakest pace since 2009. This is slower than the 8.9 percent growth recorded in the fourth quarter. The National Bureau of Statistics is slated to release the first quarter GDP figures on Friday.
Recently, international lending agencies have acknowledged the slowdown in China and trimmed their growth forecast for the nation. As recently as today, the World Bank lowered its 2012 GDP forecast for China to 8.2 percent from 8.4 percent, citing a pronounced deceleration in investment growth, slowing consumption growth and weak external demand.
In a report released Wednesday, the Asian Development Bank slashed its growth projection for China to 8.5 percent in 2012 from 9.1 percent.
Even amid the looming dark clouds, economists see a silver lining. World Bank's lead economist for China Ardo Hansson sees moderation in the risks of overheating, increasing the prospects to achieve a soft landing
The economy would have expanded 8.4 percent in the first quarter of 2012, Zhang Xiaoqiang, a senior official with the National Development and Reform Commission said early this month.
Premier Wen Jiabao has pledged to shift focus to more domestic consumption-led growth, as the ongoing uncertainties in Eurozone and weakness in global trade dimmed the prospects of a pronounced expansion in exports.
Last month's trade data presented a mixed picture. While the trade balance reversed to a surplus of $5.35 billion in March from a deficit of $31.48 billion in February, the highest since 1989, import growth slowed significantly despite government's efforts to boost domestic consumption.
Export growth slowed markedly, but the slowdown in imports outpaced that of exports.
In its latest policy-easing move, the People's Bank of China cut the reserve requirement rate for all commercial banks by 50 basis points for the second time in three months in February to boost lending amid sluggish economic growth. However, a rebound in inflation in March has dimmed the prospects of further monetary easing.
ING commented in a research note that it thinks the Chinese authorities felt they managed to normalize policy with crashing the economy. The firm expects continued policy fine-tuning comprising an additional 150 basis point cut in RRR by the year-end.
by RTT Staff Writer
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