China Q1 growth dips to 6-year low of 7% on weak demand

Raises expectations that authorities will roll out more policy stimulus to avert a sharper slowdown

China's annual economic growth slowed to a six-year low of 7% in the first quarter as demand stayed weak, meeting analyst forecasts but fanning expectations that authorities will roll out more policy stimulus to avert a sharper slowdown.

In the last quarter of 2014, China's economy grew 7.3% on an annual basis.

On a quarterly basis, economic growth slowed to 1.3% between January and March after seasonal adjustments, the National Bureau of Statistics said on Wednesday, compared with growth of 1.5% in the previous three months.

March factory output rose 5.6% from a year earlier, below the 6.9% seen in a Reuters poll, its lowest level since the global financial crisis in 2008.

Fixed asset investment, a key driver of the economy, grew 13.5% in the first quarter from a year earlier, the weakest expansion in the first three months of a year since 2000.

More bad news came from another major economic pillar, the real estate sector. Despite recent easing measures to boost mortgage borrowing and ease restrictions on housing purchases, property investment rose only 8.5% in the first quarter, down from 10.4% growth rate seen in the Jan-Feb period, which was a five-year low.

STOCK INDEXES UP

China's stock indexes, which have been on a historic rally since Beijing began easing monetary policy in November, were up slightly after the data release, with the CSI300 index up around 0.4%.

Mainland investors have tended to celebrate weak economic data releases as they are seen as strengthening the case for more liquidity injections which would find their way into the stock market.

Chinese reform-minded leaders, while emphasising the need to adapt to "a new normal" of slower but better-quality growth, have signalled growing concern about a deeper downturn that could fuel job losses and debt defaults.

Premier Li Keqiang said last week the world's second-largest economy faces increased downward pressures and the government must "stand up to" such pressure to avoid an impact on employment and incomes.

Data on Wednesday showed the economy grew 7% in the January-March quarter from a year earlier - the worst showing since the depth of the global crisis - from 7.3% in the previous quarter.

China's growth tumbled to 6.6% in the first quarter of 2009 when millions of migrant workers lost jobs. A massive stimulus package pulled the economy out of the slump but at the cost of saddling local governments with a mountain of debt.

PROBLEM OF EMPLOYMENT

Employment still holds up due to a faster-expanding services sector, but weaker growth and nagging factory deflation could force more manufacturers to cut jobs, analysts say.

"The problem of unemployment may show up if GDP growth continuously stays below 7%." said Nie Wen, an economist at Hwabao Trust in Shanghai.

Earlier data showed consumer inflation remained tepid in March while factory deflation persisted.