China growth loses momentum in blow to global expansion

March Output

China’s industrial output in March rose 8.9%, today’s report showed. That compares with the median estimate of 10.1% in a Bloomberg survey and a 9.9% pace in the first two months combined. Retail sales grew 12.6%, matching the median forecast. Fixed-asset investment excluding rural households in the first quarter increased 20.9%, against a median estimate of 21.3% and a 21.2% pace in the first two months.

The data reflect a slowdown in light industrial production, “weak” consumption partly affected by a government frugality campaign and export gains that aren’t as strong as customs figures suggest, said Wang Tao, chief China economist at UBS AG in Hong Kong.

Credit Growth

Even so, “we do not think the government should ease monetary policy further” because of “very rapid” credit growth and low interest rates, Wang said.

Industrial-production growth of 9.5% for the first quarter compared with the previous period’s 10%, while retail-sales expansion of 12.5% was lower than 14.5% in the fourth quarter.

Services accounted for 47.8% of the economy in the first period, generating more of GDP than the “secondary” industries that include manufacturing, mining and construction, which accounted for 45.9%.

The government last month set a 7.5% growth target for this year and Li said March 17 that the nation must maintain that pace through 2020 as the country seeks to double per capita income this decade.

Sheng said he’s optimistic China will achieve the goal this year, as the nation’s economic fundamentals remain sound. At the same time, China’s potential growth rate has dropped as part of an “inevitable trend,” he said.

BHP Forecast

BHP Billiton Ltd., the world’s biggest mining company, expects annual economic growth in China to moderate toward 6% after two years, Graham Kerr, chief financial officer of the Melbourne-based company, said at the Bloomberg Australia Economic Summit in Sydney on April 10.

Separately today, the World Bank cut its forecast for China’s growth this year to 8.3% from 8.4%, as it updated projections for the East Asia and Pacific region. The IMF may lower its U.S. expansion outlook to 1.7% from 2%, according to a draft report obtained by Bloomberg News ahead of tomorrow’s release.

Huaneng Power International Inc., the nation’s biggest electricity producer, said last week that power generation at its Chinese plants declined 2.4% in the first quarter from a year earlier and electricity sold slid 2.3% due to weakness in domestic power demand.

Communist Party chief Xi Jinping’s campaign to rein in lavish spending by officials and state-owned companies has dented consumption of luxury items, with high-end restaurants, food and liquor bearing the brunt of the frugality push.

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