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China gross domestic product at 18-month low

Government plans to cut reserve requirement ratio for qualifying village banks

China’s economy expanded 7.4 per cent between January and March, its slowest pace in 18 months, prompting authorities to act for the second time in as many weeks to shore up growth.

Hours after the National Bureau of Statistics released the data, Premier Li Keqiang was quoted by state media as saying that China would reduce the amount of cash that some village banks hold at the central bank to help the farm sector.

The relaxation of reserve requirements, alongside tax breaks for more companies to support job creation, comes just two weeks after China took its first step this year to juice its slackening economy — cutting taxes for small firms and speeding up investment in railways.

The unveiling of new pro-growth measures in quick succession suggests China may be more worried about the foundering economy than it lets on, even though it has ruled out the use of major stimulus to fight short-term dips in growth.

“We don’t expect the amount of liquidity released to be significant for the economy,” Zhang Zhiwei, an economist at Nomura in Hong Kong, said in reference to the reduction in the reserve requirement ratio for village banks.

“Nonetheless, this is another loosening signal from the government, which suggests it is probably more concerned about the economic outlook.”

The gross domestic product data was slightly stronger than the median forecast of 7.3 per cent in a Reuters poll, but still slower than 7.7 per cent in the final quarter of 2013. It was China’s slowest annual growth since the third quarter of 2012, when the world’s second-largest economy also grew 7.4 per cent.

Activity data for March, released with the GDP report, showed that factory output growth hit a near five-year low of 8.8 per cent, just below expectations.

Cumulative fixed-asset investment in the first three months of the year was 17.6 per cent higher than a year earlier, again on the low side of forecasts, and at a level not seen since December 2002.

Only retail sales growth was slightly above forecasts with an annual increase of 12.2 per cent.