China's weak GDP raises concerns
China's economy has produced more mixed signals about its bumpy recovery, with an unexpectedly slower rate of growth jolting global markets and highlighting the difficulties facing its new leaders in pursuing deeper economic reforms.
China's gross domestic product grew 7.7 per cent in the first three months of the year - a weaker-than-expected result that led to a fall in the Australian dollar and most mining stocks on Monday.
GDP had rebounded to 7.9 per cent growth in the final quarter of last year, marking the end of a two-year slowdown, and analysts had expected the economy to have an even stronger start to this year.
But sluggish industrial production and retail sales revealed unexpected softness in the economy, though China's first-quarter data is notorious for throwing up red herrings due to the disruption of the Spring Festival (or Chinese New Year) holiday period.
"Overall, the Chinese economy had a smooth start in 2013," said Premier Li Keqiang a day before the data was released. "But many uncertainties, both at home and abroad, still persist and make the overall situation quite complicated."
In a speech this month, President Xi Jinping said while China's economy would continue to grow strongly, the days of "high-speed growth" seen in the past three decades were over. Instead, he said, Beijing would focus on more sustainable economic expansion.
China has continued to spend heavily on a network of airports, high-speed rail and highways but has taken strong action as part of a three-year plan to prevent its property sector from overheating.
The softer retail sales has also been seen partly as a result of Mr Xi's public warnings against government officials overspending on luxury goods, amid rising anger over perceived corruption.
While the data caught analysts by surprise, most said it was not yet a cause for concern.
"I don't think this is a turning point for slower growth," UBS economist Wang Tao said. "The recovery is probably delayed but I think the recovery is still coming."
But Fitch Ratings expressed concerns last week about the long-term consequences for China's financial stability over the country's huge build-up in debt, particularly borrowing by local governments.
Economists at IHS Global Insight said "there is plenty more downside risk out there than upside risk".
"We have lost confidence in a robust recovery," Ren Xianfang and Alistair Thornton said in a note, adding that a repeat of last year's economic stimulus would prove disastrous in the long run.
"Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving Wen Jiabao correct - that the current economic model is unsustainable."