China Q1 GDP growth slows to 8.1 percent

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..BEIJING (Reuters) - China's annual economic growth slowed to 8.1 percent in the first quarter of 2012 from 8.9 percent in the previous quarter, the National Bureau of Statistics said on Friday.


COMMENTARY:

DONGMING XIE, ECONOMIST AT OCBC BANK IN SINGAPORE:

"China's GDP slowed to 8.1 percent on year in Q1, lower than our expectation. The slowdown is the result of tightening measures, with fixed investment growth slowing to 20.9 percent on year.

"The key question here is when will be the bottom for China? Given credit started to flow into the system in March as shown by strong new yuan loan (data) yesterday, we think the investment outlook could improve in the second quarter.

"China's situation is in contrast to the Euro zone situation where massive liquidity from LTROs has not been converted to credit into the real economy. In China, we have seen a good sign that liquidity from RRR cuts and open market operations is moving into the real economy. As such, I think the growth picture is likely to improve in the second quarter."

YAO WEI, CHINA ECONOMIST AT SOCIETE GENERALE IN HONG KONG:

"This is exactly as we forecast. This data released today sends a somewhat mixed message because IP and retail sales are slightly above expectations and fixed asset investment is slightly below. What's clear is that the economy is still decelerating and the property sector clearly is deflating.

"Looking at the property data, it seems that property investment has finally started to correct. I think this trend will continue and will drag growth even lower in coming months so we don't think this is the bottom yet. It means more monetary easing will be needed to prevent a sharper deceleration."

XU BIAO, ECONOMIST AT INDUSTRIAL SECURITIES IN SHANGHAI:

"The reading of 8.1 percent is lower than expected, and that's why Chinese Premier Wen has been urging policy fine-tuning.

"But Beijing is unlikely to roll out any big stimulus as a growth rate of 8 percent won't hurt employment badly.

"However, it should be noted that the potential growth rate in China is moving down."

CONNIE TSE, ECONOMIST AT FORECAST PTE IN SINGAPORE:

"The softer growth outlook is consistent with the strong March new yuan loans data, a clear signal that policymakers are aware and have chosen to stimulate growth through the credit avenue.

"I'm expecting a RRR cut announcement sometime in the next two weeks."

KEVIN LAI, ECONOMIST AT DAIWA IN HONG KONG:

"We are slightly disappointed. The main downside was with exports and some in terms of consumption.

"In general, I think the first quarter export results have disappointed the consensus.

"We still believe there should be more policy relaxation to add to growth domestically and offset weakness in exports.

The Bo Xilai political scandal "supports our case for more monetary support because stability is getting more important, to make sure nothing goes wrong in this occasion.

"Yesterday, the new loan data was a lot stronger than expected, so that was an indication the government is quite ready to provide more monetary policy support to show that at least the economy is on track for a soft landing."

LINKS:

For details, see the website of the National Bureau of Statistics at http://www.nbs.gov.cn. There may be a delay before it publishes a report on its website.

MARKET REACTION:

-- The Shanghai stock market slipped after early gains and was up 0.12 percent after the data. The yuan weakened to 6.993 to the U.S. dollar.

BACKGROUND:

-- China's economy has entered its fifth consecutive quarter of slowdown due to a combination of slackening global demand and sustained official restrictions on the property market. But the economy is slowing, not crashing.

-- Central Bank Governor Zhou Xiaochuan vowed last week to use various monetary policy tools to tackle inflation and engineer a "soft landing".

-- Most analysts expect Beijing to continue to lower reserve requirements for commercial banks to crank up credit to support growth, while refraining from cutting interest rates.

-- Premier Wen Jiabao has cut the annual economic growth target for 2012 to an eight-year low of 7.5 percent, signaling greater tolerance for slower expansion to focus more on restructuring the economy to boost consumption.

(Reporting by Kevin Yao and Zhou Xin; Editing by Ken Wills)

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