
China鈥檚聽economy聽is expected to have slowed in the first three months of the year as it continues to be buffeted by a debilitating property sector crisis and flagging consumer activity.
Beijing officials last month set a target of around five per cent growth for the year 鈥� a goal they admitted would 鈥榥ot be easy鈥� and which analysts said was ambitious given the headwinds the country is confronting.
But there are some bright spots 鈥� figures last month showed industrial production soared even as consumption remained sluggish, reflecting the uneven recovery China has charted since emerging from growth-strangling zero-Covid policies in early 2023.
And analysts said they expected China to post around 4.6 per cent growth in the year鈥檚 first quarter Tuesday, down from 5.2 per cent in the final three months of last year.
Analysts polled by Bloomberg expect it to come in at 4.8 per cent.
Woes in the property market remain a millstone for the聽economy, analysts said, as home prices continued to fall and top developers including Country Garden and Vanke sent out distress signals over their profits and challenges paying off debt.
鈥楶ersistent property sector weakness and subdued household consumption, resulting from negative wealth effects from the property correction and somewhat sluggish income growth鈥� will hamper growth, Brian Coulton, Fitch Ratings鈥� Chief Economist told AFP.
Policymakers have announced a series of targeted measures as well as the issuance of billions of dollars in sovereign bonds in order to boost infrastructure spending and spur consumption.
But analysts say much more needs to be done in the form of a 鈥榖azooka鈥� stimulus.
鈥楾he stimulus is limited (both monetary and fiscal) so the effect will be limited,鈥� Alicia Garcia Herrero, Chief Economist for Asia Pacific at French investment bank聽Natixis, told AFP.
鈥榃e do not expect major interest rate cuts or big fiscal stimuli since the room for China to do both things is limited,鈥� she added.
Ratings agency Fitch this month downgraded China鈥檚 sovereign credit outlook to negative, warning of 鈥榠ncreasing risks to China鈥檚 public finance outlook鈥� as the country contends with more 鈥榰ncertain economic prospects鈥�.
And observers say state pledges of support for the property sector are yet to sway the market or consumers.
鈥楬ome buyers remain very bearish,鈥� Gene Ma, head of China research at the Institute of International Finance, told AFP.
Sluggish consumption is another bugbear.聽
Last month, retail sales 鈥� the main indicator of household consumption 鈥� increased 5.5 per cent year-on-year, down from the previous month despite covering a holiday period that typically sees a spike in spending.
鈥楢 lack of domestic consumer demand will remain a drag鈥� on growth despite an improvement on the industrial production front, Heron Lim, an analyst for Moody鈥檚 Analytics, told AFP.
Fears that China could slip back into deflation was also a major drag.
Consumer prices fell for several months from August, before rising 0.7 per cent in February.
But the consumer price index edged up by only 0.1 per cent on-year last month, renewing deflationary fears.
While deflation suggests goods were cheaper, it poses a threat to the broader聽economy聽as consumers tend to postpone purchases, hoping for further price reductions.
A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks 鈥� dampening profitability even as costs remain the same.
鈥業nflation is a fever of an聽economy, while deflation is a cancer,鈥� Ma said. 鈥楢 prolonged deflation will hurt consumption and investment demands.鈥�
Manufacturing was one bright spot in the first quarter, the analysts said, pointing to the strong official data in March.
鈥極ur proprietary indicators suggest more robust manufacturing activity than construction activity,鈥� James Seddon of Goldman Sachs told AFP.
鈥楻elatively positive industrial production and export news mean that growth will come in steady this quarter,鈥� Lim at Moody鈥檚 told AFP.
Still, he warned that more government support would be needed to prop up growth in the medium term, as there were 鈥榝ew policy support measures targeted at supporting domestic consumption directly鈥�.