INSTANT VIEW: China Q1 GDP growth slows

BEIJING (Reuters) - China's annual GDP growth slowed to 6.1 percent in the first quarter from 6.8 percent in the final three months of last year, marking the weakest expansion since quarterly records began in 1992.

The GDP figure, announced by the government on Thursday, underlined how the global financial crisis has weighed on the world's third-largest economy, but it was accompanied by a slew of data for March that suggested China may already be on the road to recovery.

KEY POINTS:

-- Continued strength in fixed-asset investment in March (up 28.6 pct y/y in Jan-March), coupled with a rebound in industrial production (up 8.3. pct y/y), made it the strongest month of the quarter.

-- Consumer prices were down 1.2 percent in year to March; producer prices down 0.3 percent.

COMMENTARY:

XING ZHIQIANG, ANALYST AT CHINA INTERNATIONAL CAPITAL CORPORATION IN BEIJING:

"Most of the indicators are better than earlier market expectations, although the annual GDP growth in the first quarter a historical low.

"We expect that the most difficult time for China's economy has passed, as the surge in investment has partly offset the negative impact from declining exports."

BRATIN SANYAL, HEAD OF ASIAN EQUITY INVESTMENT, ING INVESTMENT MANAGEMENT, HONG KONG:

"The first quarter was supposed to be the weakest quarter of the year and China will progressively pick up in two, three and four. That thesis remains intact.

"On balance it doesn't derail the story that the Chinese government has been able to prevent the Chinese economy from sliding badly.

"For now the data reflect a bottoming. Why? Because the success of the Chinese stimulus program is evident and undeniably working. I suspect Q2 is going to be quite alright. However, loan growth will have to moderate from here."

THIO CHIN LOO, CURRENCY STRATEGIST AT BNP PARIBAS IN SINGAPORE:

"The softer headline GDP data caused a knee-jerk reaction to buy dollar, sell Australian dollar and Asians, but we believe that with data 'less bad' (evident in March data) and Chinese reflation to remain intact, with talk of potentially another fiscal package to stimulate growth, the recent optimism is unlikely to be washed out totally.

"A buy on dips mentality still looks to be the state of play for the Australian dollar and a sell on dollar rallies for selected Asian pairs, e.g. South Korean won, Philippine peso, Malaysian ringgit, Indian rupee."

PATRICK BENNETT, ASIA CURRENCY AND RATES STRATEGIST, SOCIETE GENERALE, HONG KONG:

"It was very much in line with expectations. The fixed asset investment is probably the best of the set.

On what it means for Asian currencies: "Probably not a lot. Most have been firmer recently on improved risk appetite.

"The outperformers in the region should be Taiwan dollar and Korean won, as both economies have better leverage to China than say the economies of South Asia."

LU ZHENGWEI, CHIEF ECONOMIST WITH INDUSTRIAL BANK IN SHANGHAI:

"For me, the GDP growth is unacceptably low. Though it's only slightly lower than the 6.3 percent market expectation, we need to note that we are at a very sensitive time now.

"On the upside, the government's stimulus package on investment seems to be working now. However, we know that it has not stimulated private investment yet. And investment by local governments is also in trouble due to funding shortage.

"On the downside, I think it's now difficult to spur exports and consumption. There is not much room for China to raise the export tax rebate now, as it is already at a historical high.

"The best way to boost exports in my personal view is yuan depreciation. However, I don't think the government will do so and we have actually missed the best timing for doing so.

"To boost consumption, we must raise people's expectations on income. However, as we know, most Chinese are now very pessimistic about their income outlook.

"Therefore, the only way is to continue stimulating investment in the short term. However, for the long term, China needs to change its economic structure and improve the medical insurance system."