By Chen Jia (China Daily)
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Workers prepare steel frames for a bridge on the Lianyungang-Yancheng railway in Ganyu, Jiangsu province. TheState Council announced pro-growth measures on April 2, including railway investment and urban renovationprograms. SI WEI/CHINA DAILY
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Analysts say economy is on the mend after a weak start for industrial output
The World Bank has lowered its forecast for China's economic growth this year to 7.6 percentfrom 7.7 percent, taking into account soft data on industrial output and exports in the first twomonths of the year, the multilateral organization said in a report on Monday.
It has maintained its 2015 forecast at 7.5 percent.
The bank said: "While the growth rate of industrial productionhas slowed, and exports contracted in the first two months of2014, the trend is nevertheless strengthening, and we expectquarterly growth to rise at midyear as external demand fromthe high-income countries solidifies."
Some analysts have said that the Chinese economyprobably began to rebound in March, although first-quartergrowth may fall though the government's "bottom line" ofabout 7.5 percent. These analysts estimated first-quarterGDP growth at 7.2 to 7.4 percent.
But the economy is on the mend, and that will be evident inthe second-quarter figures, which will get a lift from thegovernment's "fine-tuning", said a report from The Australiaand New Zealand Banking Group Ltd.
The State Council, the country's cabinet, announced pro-growth measures on April 2, including railway investment,urban renovation programs and tax breaks for smallbusinesses. Analysts said those steps indicate thegovernment aims to avoid a sharp slowdown and stabilizenear-term growth.
Power generation, rail cargo volumes and crude oil processing activity in March all showed signsof improvement. Surveys also found rising business confidence.
According to the National Development and Reform Commission, from March 1 to 24, electricityoutput increased 8.4 percent year-on-year, compared with 5.5 percent growth in the first twomonths.
Further evidence of an economic rebound came in stronger export data, in the form of higherorders in the official and HSBC Holdings Plc manufacturing Purchasing Managers' Indexes forthe first two months.
Now economists are looking to the next round of statistics. The National Bureau of Statistics isscheduled to release figures on consumer and producer prices on Friday.
First-quarter GDP data are due on April 16.
"We expect the upcoming March data to show a modestsequential recovery of economic activity, which may onlypartly offset particularly weak start in January and February,"said Wang Tao, chief economist in China at UBS AG. Thebank has estimated that GDP growth in the first quarterprobably softened to 7.4 percent from 7.7 percent in thefourth quarter last year.
"Looking ahead, we expect growth momentum to reboundmore visibly in the second quarter, on the back of reducedpolicy uncertainties after the annual session of the NationalPeople's Congress in March, an acceleration of ongoingconstruction and investment and the launch of new projectsalready approved in the government's budget and economicagenda," said Wang.
Analysts expect additional pro-growth measures willaccompany the acceleration of structural reforms in thecoming months.
The most likely step is fiscal stimulus, they said. In Januaryand February, the Ministry of Finance reported a fiscal surplus of 786 billion yuan ($125 billion).The government has room to increase expenditure in the coming months, because the full-yearbudget deficit target is 1.35 trillion yuan.
On the monetary front, Zhu Haibin, chief economist in China at JPMorgan Chase & Co, saidthat the People's Bank of China, the central bank, will maintain neutral monetary and creditpolicies but with some fine-tuning to support growth.
