By AFP / Pic By BLOOMBERG
BEIJING • China’s economy cooled further in the first quarter, according to an AFP survey of analysts, as Beijing resorted to tried-and-tested measures to combat tepid global demand and a bruising US trade war.
The world’s second-largest economy expanded by 6.3% in the January to March period, the poll of 13 economists found ahead of the official release of GDP figures on Wednesday. It would mark the slowest pace of quarterly growth for almost three decades.
The figure remains within the range targeted by the government of 6% to 6.5% for the whole year, down from 6.6% in 2018.
To combat the slowdown, Beijing has stepped up support for the economy in recent months, announcing massive tax cuts and other fee reductions to help struggling companies.
Last month, Premier Li Keqiang acknowledged “downward pressure” but vowed not to let the economy “slip out of a reasonable range”.
Beijing faces a delicate balancing act as it tries to support private businesses in need of credit, without further inflating its debt balloon.
Policymakers have turned the credit taps back on after several years of crushing deleveraging with credit data last Friday from China’s central bank showing monetary easing kicking in.
Bank loan growth accelerated to its fastest monthly pace since 2016, said Chang Liu of Capital Economics, noting it usually takes six months for credit growth to translate into greater economic activity.
But another economist, Bjorn Giesbergen of RaboResearch, warned that loans have not always reached the private sector and “China’s debt-to-GDP levels are already excessive”.
The problems are only going to get “exponentially worse” if the new credit again does not flow to the private sector, he told AFP.
Policies enacted this month, like cutting the value-added tax, and a cut in company social insurance contributions coming next month will more directly help China’s struggling private sector. Last year, China’s infrastructure investment fell to 3.8% year on-year growth, down from years of near 20% expansion. In recent months, big earth moving projects that Beijing had put on hold were restarted to pull along the economy.
Growth was largely driven by infrastructure investment, with project approvals front-loaded and huge special bond issuance, said Nathan Hung Lai Chow, an economist at DBS. “Consumer confidence remained fragile due to job insecurity.” — AFP