China posted its slowest economic growth since 2009 on Friday. The increase of 6.7 percent in the Gross Domestic Product for the first quarter, slightly slower than the previous quarter’s 6.8 per cent, was in line with the government’s growth target of 6.5 percent to 7 percent for the full year.
Other indicators released, however, showed new debt in the form of new loans, retail sales, industrial output and fixed asset investment were fueling a recovery in factory activity, investment and household spending.
Some analysts say the data indicates a bottoming out in the economy's slowdown while others point to a similar start after the first quarter of 2015 which preceded a stock market crash later that year.
According to Tao Dong, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong, “The economy has stabilized thanks to a flood of liquidity and improved sentiment in the property market. It is not clear whether the momentum is sustainable. So far, the government seems to be the solo singer. It is critical to re-engage private investment.”
6 Rate Reductions in 18 Months
Friday's growth report supported the aggressive monetary stimulus taken by the People's Bank of China which has lowered interest rates six times since November 2014 as well as slashing the reserve requirement ratio (RRR) for banks. The central bank's last reduction was in February, when it cut the RRR by 50 basis points.
Market reaction to the news was subdued with the benchmark Shanghai Composite and the Hang Seng Index both losing 0.3 to 0.4 percent while the Australian dollar ticked up 0.2 percent and the yuan was little changed around 6.4868 per dollar.