China's growth slumps signaling dismal year

BEIJING: Chinese economy faced the prospects of a dismal year as the growth in the first year was worst since the 2009 financial crisis. The gross domestic product grew at 7 percent, which is lower compared to the previous quarter and the 2015 target of 7.5 percent.

The reduced growth came about in the face of sliding exports and fall in prices of property, which accounts for a significant part of the annual investments. The previous quarter saw a growth of 7.3 percent.

Chinese officials said the slump was self-imposed because the government was in the process of changing the structure of the economy.

"We still are relying on a traditional growth engine, and that is declining," a spokesman for the National Bureau of Statistics, Sheng Laiyun, said at a press conference. "We are in transition between the old and new growth models." The reduced growth is expected to hit job creation and add to social stress, observers said.

The contraction has hit several sectors of the economy with total trade slowly by 6.3 percent in the first quarter compared to the same period a year ago. The fall in March exports was a sharp 15 percent.

Factory output figures show growth slowing to 6.4 percent from 9.8 percent rate in the previous quarter that ended in December 2014. Investment in real estate, factories and other fixed assets rose 13.5 percent, down from last year's 15.7 percent expansion.

"The Chinese economy is on the edge of deflation," Chen Yuyu, Professor of Applied Economics in Peking University's Guanghua School of Management, said. He expects a further cut in interest rates and relaxation in monetary policy.

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