(Adds cabinet meeting)
* China Q1 GDP growth 6.1 percent vs forecast of 6.3 pct
* March data pick up from first two months
* Cabinet says economy in better shape than expected
* Government says no place for "blind optimism" about
* Economists estimate quarterly growth picked up from Q4
By Simon Rabinovitch and Zhou Xin
BEIJING, April 16 China struggled out of the
gate this year with its weakest quarter on record, but a
pick-up in March showed the world's third-largest economy was
on track for stronger growth in coming months.
A surge in lending and public spending cushioned a collapse
in exports, suggesting that while Beijing may yet do more to
prop up demand, it need not launch a new stimulus package on
the scale of its 4 trillion yuan ($585 billion) plan announced
Annual economic growth slowed to 6.1 percent in the first
quarter from 6.8 percent in the fourth quarter, official data
showed on Thursday, slightly missing economists' 6.3 percent
forecast and marking the weakest expansion since quarterly
records began in 1992. (For a graphic, click on:
But analysts said that quarter-on-quarter growth, which the
government does not publish, was in the range of 5.3-6.2
percent in the first quarter, considerably above their
estimates of 0.9-2.5 percent for the final three months of
"The series of policies to expand domestic demand and
promote stable and quite fast growth are beginning to show
results," the official Xinhua news agency said summarising a
meeting of China's State Council, or cabinet.
"There are positive changes in the economy and the
situation is better than expected," said the report of the
meeting, which was chaired by Premier Wen Jiabao.
The cabinet also struck a cautious note, warning against
"blind optimism" about the economy. It promised to take steps
to encourage private investment, which it said was still too
weak, and said it would study how to attract more foreign
The cabinet vowed to tweak existing stimulus measures and
guide the flood of bank credit to ensure it reaches the
economy, but it made no mention of a new stimulus package, an
idea that had surfaced as a market rumour in recent days.
Analysts said the economy's momentum lent more credence to
Beijing's assurances that it can reach its 2009 growth goal of
8 percent, widely seen as a minimum for creating enough jobs
for the country's ever-expanding labour force.
Shares in Shanghai see-sawed as the market digested the
data to close 0.1 percent lower. World stocks eked out small
gains after Asian markets pulled back from a six-month high and
the safe-haven yen gained as investors abroad took China's weak
quarter as a sign of the frailty of the global economy.
With the United States, Japan and much of Europe all deep
in recession, investors count on China to lead the global
recovery and many had bet on a stronger number that would send
a clear signal that the world's main growth engine was back in
Yet when economists looked beyond the headline figure, they
found reasons for optimism that China's recovery will gather
steam in coming quarters.
Annual growth in urban fixed-asset investment surged
unexpectedly to 28.6 percent in the first three months, while
annual industrial output growth rebounded to 8.3 percent in
March from a record low 3.8 percent in January-February.
"The economy has started to benefit from the end of the
massive destocking process as well as the government's stimulus
package," said Mingchun Sun at Nomura Global Economics in Hong
Kong. "In fact, much stronger-than-expected bank lending and
investment growth in the first quarter suggest that growth
could be very strong in the second half," he said.
Where opinions differed, it was about the pace of the
rebound, rather than the upward direction of the economy.
"We think that the economy will remain subdued in the next
few months but should start to improve gradually in the second
half of 2009," said Brian Jackson, economist at Royal Bank of
Canada In Hong Kong.
Still, the numbers were not strong enough to dash market
hopes that Beijing would top up its stimulus package with more
spending as depressed global demand for Chinese-made goods
would continue to weigh on the economy.
"The situation is still quite challenging as seen in the
fall in the output of foreign-owned companies, which are mostly
geared to exports," said Suan Teck Kin, economist at United
Overseas Bank in Singapore, who sees full-year growth at 6.5
In a sign that the economy still faces a bumpy ride in
months ahead, the Shanghai Securities News reported that the
decline in China's power consumption, a measure of economic
activity, accelerated in the first 10 days of April.
On a positive note, deflationary pressures appeared to ease
at the consumer level with prices falling 1.2 percent in March
from a year earlier, in line with expectations and a less
marked fall than in February.
(For a graphic, click on:
Producer prices, however, fell 6.0 percent in March from a
year ago, more than expected and faster than the 4.5 percent
annual drop in February.
(Additional reporting by Jason Subler, Aileen Wang and Langi
Chiang; Editing by Ken Wills and Tomasz Janowski)