No one likes disappointments, and China's economic growth in the first quarter was a big one. Economists had been expecting the country's gross domestic product to grow by about 8.4 per cent, at an annualized pace. And there was speculation swirling through markets on Thursday afternoon that the official number could blast past expectations, hitting 9 per cent. The actual number: 8.1 per cent.
That might look robust by North American standards, but it marks the slowest pace of growth since 2009 and is down sharply from 8.9 per cent growth in the fourth quarter -- making the 7 per cent growth that some observers believe marks the start of a hard-landing all too close.
But wait, there's good news here too. Some bearish observers on China are wondering if the first quarter marks the low point for China's economic growth deterioration, implying that things will get better from here on out. Zhiwei Zhang, a Normura strategist who had been forecasting 7.8 per cent GDP growth in the first quarter and put the odds of a hard-landing at 1 in 3, had this to say (via FT Alphaville):
"Our assessment is that China's GDP growth has bottomed and that growth will start to pick up from this quarter. GDP is a rear-view-mirror statistic. Forward-looking indicators, such as the OECD's composite leading economic index for China and new loans (which surged to RMB 1.01-trillion in March) support our view. Policy easing, both fiscal and monetary is underway, and we expect more to come, especially with CPI inflation likely to ease in the coming months."
Accordingly, the analyst is now reviewing the previous forecast for 8.2 per cent GDP growth in 2012, believing that it might be too low. In other words, no hard landing here.
David Berman