Positive signals

Arriving with the downward figures, there were encouraging upward ones.

Both the Purchasing Managers Index (PMI) and consumer confidence index picked up momentum in the past few months, indicating the economy was on a path of steady growth.

The PMI, a preliminary readout of manufacturing activities, rose in April for the fifth consecutive month. And the consumer confidence in the first quarter was the strongest since 2005, according to a report by the international market research firm Nielson.

The per capita income of urban and rural residents rose significantly in the first quarter, reaching 9.8 percent and 12.7 percent, respectively, both outpacing GDP growth. If this trend continues, it is more likely to see a consumption-driven China with its 1.3 billion consumers taking shape now than any time in the past. Over the past three decades, per capita income rarely grew faster than the general economy.

“The government’s firm support for small and medium-sized enterprises through expansion of credit, shifting policy to boost domestic consumption and demand, and continued enforcement of restrictions designed to deflate the real estate bubble are all contributing to consumer optimism,” said Yan Xuan, president of Nielsen Greater China.

“The leading economic indicators we monitor have been stabilizing, indicating a further sharp growth fall is not likely,” said Pan Jiancheng, deputy director of the China Economic Monitoring and Analysis Center, a research unit of the NBS.

“Forward looking indicators are starting to recover. At least we can say in the future, the Chinese economy will not have a sharp slowdown,” Pan said.

Pan pointed to an uptick on a monthly basis in leading indicators such as the new orders and input purchasing sub-indexes in the NBS’ Purchasing Manager Index, as against a slide in manufacturing output, which measures past economic performance.

He noted that a business confidence index rose in the first quarter compared with the fourth quarter.

Dropping producer prices were evidence of overcapacity in the Chinese manufacturing sector, which prevented factories from passing on higher labor and raw materials costs, Pan said. PPI fell 0.7 percent year on year in April.

Though GDP growth slowed to 8.1 percent in the first quarter, the fifth decline in a row, economists said the situation is not likely to worsen in the following quarters.

“The year-on-year GDP growth of 8.1 percent in the first quarter has different meanings to different analysts,” Pan said. “On one hand, it slows down in five consecutive quarters and the figure seemed to grow in the first quarter. However, such a growth rate is still normal. Our economy growth didn’t not turn into a depressed situation, nor did the early warning system send a warning.”

“We should be accustomed to the growth slowdown after it has kept a high rate for a long time, and not focus on growth rate solely,” Pan suggested.

In fact, amid the global recession, this 8.1 percent growth rate remains a “high score,” outgrowing the 7.5 percent goal of the whole year set by the government. And the periodical change does not mean the economy has shown some adverse effect physically.

“China is experiencing a policy-led economic slowdown in growth which was implemented by the authorities in response to the inflation pressure that emerged last year, and it seems to me well within the parameters of normal policy management,” said Andrew Colquhoun, head of sovereign ratings for Fitch Asia Pacific.