BEIJING--China's gross domestic product growth slipped in the first quarter to its slowest level in 18 months as the world's second-largest economy continued to downshift.
Reduced momentum in investment and consumption--key drivers of the economy--were behind the moderately weaker quarterly growth.
The 7.4% growth over the year-earlier period was below the 7.7% level seen in the fourth quarter of 2013, and slightly below the target of "about 7.5%" set by China's leadership for all of 2014. But it came in slightly above economists" expectations, according to a Wall Street Journal survey of analysts.
The weakened growth signals more choppy waters ahead for the world economy, as China is a major global growth engine. The slightly faster-than-expected result also muddies the waters on whether Beijing will step up measures aimed at supporting growth. In early April, the government announced a series of "mini-stimulus" measures to offset recent slippage in trade and industrial production. These included the acceleration of planned spending on railroad infrastructure and a razing and rebuilding program for shantytowns.
Further weakness moving into the second quarter could prompt planners to double down on these more modest investments, although few expect a major stimulus of the sort seen in late 2009 after the global financial crisis.
"The economy will rely on investment for some time to come," Standard Chartered economist Li Wei said. "Without support, economic growth will continue to weaken."
Mr. Li added that he expects some monetary-policy support such as a reduction in banks" reserve requirement ratios in the second half of the year. Others said authorities could add money into the financial sector, increase tax rebates or accelerate investment in transportation, alternate energy and senior-care facilities.
The Shanghai and Hong Kong stock markets both were up modestly following the news. The Australian dollar--which is sensitive to Chinese economic results because Australia is a heavy supplier of resources--strengthened against the U.S. dollar.
Officials at the statistics bureau attributed then slower first-quarter growth data to weak external demand--affected in part by the severe U.S. winter-- a struggling real-estate market and structural changes.
"The growth slowdown is a reflection of China's growth model transformation," National Bureau of Statistics spokesman Sheng Laiyun told reporters. "China can no longer expect double-digit growth."
Industrial production grew 8.8% in March, slightly below analyst expectations of 9%. This compares with 8.6% year- over-year growth in January and February, which were combined to limit distortions from the Lunar New Year holiday, according to the bureau.
The purchasing managers index for March, another indicator of the health of the manufacturing sector that was released earlier this month, was also less than robust.
Fixed-asset investment--covering areas such as machinery, land and buildings--edged up to 17.6% in the first quarter, slightly below expectations, compared with 17.9% year-over-year in January-February. Analysts attributed the result in part to problems in the housing sector.
Some analysts, however, argued that the lower investment number is a positive sign--an indication that China is moving away from excessive reliance on investment, effectively subjecting companies to greater financial discipline.
"It's a move in the right direction," said ING economist Tim Condon, adding that 2013 wasn't a good year for restructuring in China. "It was the culmination of a decade of no reform," he added. "But 2014 is shaping up to be much better."
Still, officials didn't disclose how much of first-quarter growth was attributable to consumption versus investment.
China is grappling with mounting debt at the local government level and in the real estate, steel and resources sectors. Since the beginning of this year, the country has recorded a handful of defaults on trust loans and corporate bonds that have sent jitters through financial markets.
Retail sales, meanwhile, posted 12.2% year-over-year growth for March, in line with the consensus and a modest increase over the 11.8% year-over-year rise seen in January and February. An anti-extravagance campaign introduced last year to stem corruption continues to impede spending significantly, said Standard Charter's Mr. Li, although it is difficult to quantify the chill, which has impacted everything from tourism and designer handbags to restaurant outings and yachts.
Behind the numbers is growing weakness at Chinese companies and in the real-estate market. Wu Siqin, a native of Hulunbuir in China'sInner Mongolia region, expects her income to hold steady this year "at best" given jitters in the local economy, as the private construction company where she works struggles to make a profit. "The property market in second- and third-tier cities doesn't look promising at all," said Ms. Wu, 39 years old, referring to types of Chinese cities based on development.
While China's current GDP growth levels would be the envy of most countries, they pale compared with decades of double-digit growth. Planners believe the world's most-populous country needs high output levels to absorb legions of migrant workers and new graduates hunting for jobs.
At a meeting in October, Premier Li Keqiang said that China needs economic growth of at least 7.2% to ensure sufficient employment, according to the Worker's Daily, a Beijing-based government newspaper. "The reason why we want to stabilize growth, in the final analysis, is to preserve jobs," Mr. Li was quoted as saying.
--Liyan Qi, Richard Silk, Grace Zhu and William Kazer contributed to this article. (END) Dow Jones Newswires
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