Polls Shows China Grew at 7% in Q1

China’s economy probably cooled further to grow 7 percent in the first three months of the year, a Reuters poll showed, which would be the weakest pace in six years and raise pressure on policymakers to do more to bolster growth.

A poll of at least 16 analysts showed activity from trade to investment in the world’s second-biggest economy likely remained around multi-year lows in March. That would increase the chance that China will post its slowest growth in 25 years this year.

The deluge of data over the coming week, starting with inflation on Friday and culminating with gross domestic product (GDP) data on April 15, will almost certainly revive speculation about when and how China will next ease monetary policy.

China has lowered interest rates and relaxed banks’ reserve requirements in the last three months as activity has slowly deteriorated. Investors widely expect it to loosen policy on both fronts again in coming months, if not coming weeks, to shore up flagging growth.

“They probably have to do a little bit more, a little bit sooner,” said Kevin Lai, an economist at Daiwa Securities in Hong Kong, who predicts first-quarter growth of 7.1 percent.

He said Chinese policymakers would likely be alarmed if the economy slowed to around 6.8 percent annual growth in the first three months, a level that’s half a percentage point lower than fourth-quarter growth.

The pace of such a cooldown would be “too drastic, too rapid”, Lai said, and would argue for policymakers to act more quickly to smooth fluctuations in growth.

Friday’s inflation data could offer clues on how worried policymakers should be.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza