China Grows 8.4% in Estimate Cited by NDRC Vice Chairman

China Set to Exit Slowdown as Government Supports Infrastructure
China’s economy is set to exit a seven-quarter slowdown as the government rolls out infrastructure projects and limited inflation lets officials hold off from tightening monetary policy. Photographer: Qilai Shen/Bloomberg

China’s economy may have expanded about 8.4 percent in the first quarter, the least since the first half of 2009, according to an estimate given by an official 10 days before the data are due.

Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, cited “relevant China research institutes’ initial figures” for the estimate and predicted a gain of about 3.5 percent in consumer prices. He spoke today during a panel discussion at the Boao Forum for Asia, a gathering of government and business leaders on China’s tropical island of Hainan.

The growth figure compares with the 8.3 percent median estimate of 28 economists surveyed by Bloomberg News. The fifth straight slowdown in quarterly growth will underscore concerns that weakness in the Chinese economy is set to limit a global expansion already capped by Europe’s austerity measures.

“The final number will be very close to 8.4 percent,” Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong, said in an interview in Boao. “They can get a relatively accurate forecast or estimate of first-quarter GDP.”

Premier Wen Jiabao pared this year’s expansion target to 7.5 percent from an 8 percent goal in place since 2005 on March 5, part of government plans to tilt growth toward consumption and away from exports. In the fourth quarter of last year, growth was 8.9 percent.

Trade Deficit

China had its largest trade deficit since at least 1989 in February as Europe’s sovereign-debt turmoil damped exports and imports rebounded after the weeklong Lunar New Year holiday. Exports fell for the first time in two years in January, while industrial production and retail sales have slowed this year.

Even so, Morgan Stanley joined Nomura Holdings Inc. and Deutsche Bank AG in raising its forecast for China’s economic growth this year. The world’s second-biggest economy will expand 9 percent, higher than a previous estimate of 8.4 percent, said Helen Qiao, a Morgan Stanley economist.

Economists are forecasting that China will ease monetary policy to boost growth. Analysts in a Bloomberg News survey last week unanimously said that banks’ reserve requirements will fall this year, while nine of 20 predicted lower benchmark borrowing costs.

Monetary easing through a reserve-ratio or interest-rate reduction “is becoming more likely already in April,” Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a note today.

Message for Fed

Separately today in Boao, China’s central bank Governor Zhou Xiaochuan urged the U.S. Federal Reserve to consider the global effects of its actions after emerging-market economies suffered from capital inflows.

The comments, from a panel discussion, reprise criticism of the U.S. from emerging nations who complained that so-called quantitative easing was sending unwanted cash into their economies, adding to inflation risks.

Zhou said he understands the necessity of what the U.S. is doing to boost its own economy. Still, as the U.S. dollar is the world’s main reserve currency, the Fed “may have more responsibility not only to consider the U.S. economy but also the global economy,” he said.

The world is still grappling with the financial crisis and there are unspecified “new elements” that could create a new global recession, Zhou said today. He said China encourages capital outflows and will do more to support investment abroad.

For China and some other emerging economies, the policy goal is to “gradually bring inflation down” to help achieve a so-called soft landing, and China is using interest rates combined with additional tools to achieve that, Zhou said today. He declined to comment when asked if the central bank is planning any adjustments to monetary policy.

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