Authorities have ruled out major stimulus to fight short-term dips in growth, signalling the slowdown was an expected consequence of their reform drive, even as some analysts think the economy will lose further momentum.
The economy grew 7.4 percent in the January-March quarter from a year earlier, the National Bureau of Statistics said on Wednesday. That was slightly stronger than the median forecast of 7.3 percent in a Reuters poll but still slower than 7.7 percent in the final quarter of 2013.
It was China's slowest annual growth since the third quarter of 2012, when the world's second-largest economy also grew 7.4 percent.
"The slowdown of China's economy is a reflection of a transformation of the economic mode," said Sheng Laiyun, of the National Bureau of Statistics.
"There is no fundamental change in the improving trend of China's economy. The economy is still moving steadily towards the expected direction."
For the quarter, the economy grew 1.4 percent, the slowest rate in two years, which Credit Agricole strategist Dariusz Kowalczyk said equated to annualised growth of 5.8 percent.
"This highlights the depth of deceleration at the start of the year," he said.
Beijing has announced some modest measures, such as tax cuts for small firms and speeding up investment in railways, to try to steady growth near its target of 7.5 percent without disrupting plans to restructure the economy or worsening problems of overcapacity and debt.
"Policymakers seem pretty comfortable with the current pace of growth," said Julian Evans-Pritchard, an economist at Capital Economics in Singapore. "I don't think they're going to announce any further significant measures to support growth."
Activity data for March, released with the GDP figures, showed that China may be making some headway in its attempt to enhance the role of consumption and cut its reliance on traditional growth engines of exports and investment.
Retail sales were a shade ahead of forecasts with an annual increase of 12.2 percent, while factory output came in just below expectations with a rise of 8.8 percent.
"That sector is continuing to moderate and now there is an even bigger gap between industrial production and retail sales. So the rotation from relying on heavy industries towards consumption is certainly coming to fruition," Annette Beacher, head of Asia-Pacific research at TDSecurities in Singapore said.
Cumulative fixed-asset investment in the first three months of the year was 17.6 percent higher than a year earlier, again on the low side of forecasts.
The services sector, which includes retail, made up 49 percent of gross domestic product in the first quarter, 4.1 percentage points more than the industrial sector.
Growth in retail bodes well for employment, a top government priority, as services are now the biggest employer in China.
"The resilience of the relatively labour-intensive services sector has helped the labour market hold up reasonably well in the first quarter, even though it cooled," Louis Kuijs, RBS economist in Hong Kong, said in a note.
Previously released figures for March had raised concerns that economy was losing more momentum than expected, and even though first-quarter GDP was slightly better than forecast, those worries remained.
Exports fell for the second month in a row and imports dropped sharply in March, while money supply grew at its slowest annual pace in more than a decade. Official and private surveys also show the manufacturing sector continuing to struggle.
Stephen Green, an economist with Standard Chartered in Hong Kong, expects a 50 basis point cut on the reserve requirement ratio banks in coming months, a move that would free up more funds in the economy.
"It's not bad enough to change monetary policy, but forward indicators suggest that in the next few months we will see more aggressive easing," Green said
China Q1 GDP growth slows to 7.4 pct, beats expectations
(AP) - China's economic growth slowed further in the latest quarter but appeared strong enough to satisfy Chinese leaders who are trying to put the country on a more sustainable path without politically dangerous job losses.
The world's second-largest economy grew by 7.4 percent over a year earlier, down from the previous quarter's 7.7 percent, government data showed Wednesday. It matched a mini-slump in late 2012 for the weakest growth since the 2008-09 global crisis.
Beijing is trying to guide the impetus for China's economic growth toward domestic consumption instead of trade and investment following the past decade's explosive expansion. The top economic official, Premier Li Keqiang, last week ruled out new stimulus and said leaders will focus on `` sustainable and healthy development.''
Chinese growth held up better than expected last quarter and there are signs that downwards pressure on growth has eased somewhat,'' said analyst Julian Evans-Pritchard of Capital Economics in a report.
Retail sales and factory output were weaker than in the previous quarter but improved in March. On a quarter-to-quarter basis, economic growth from January to March slowed to 1.4 percent from the previous period's 1.8 percent.
The data reflect official efforts to shift emphasis from industry to services such as restaurants and retailing that generate more jobs with less investment.
The resilience of the relatively labor-intensive services sector has helped the labor market hold up reasonably well,'' said RBS economic Louis Kuijs in a report.
The latest growth is below the official annual target of 7.5 percent announced last month. But Chinese leaders appear willing to miss that target so long as the economy creates enough jobs to avoid potential unrest. In a sign of concern about employment, they launched a mini-stimulus in March of higher spending on building railways and low-cost housing.
Policymakers appear comfortable with the current pace of growth,'' said Pritchard. The policy response to today's numbers is likely to be muted.''
The quarterly expansion matched the third quarter of 2012, when growth tumbled after global demand for China's exports weakened unexpectedly while the government was tightening lending and investment controls to cool surging inflation.
The past decade's rapid growth, which peaked at 14.2 percent in 2007, was driven by an export boom and spending on factories, apartment towers and other assets. But that model is losing its ability to drive growth. It also left China with badly polluted air and water.
Chinese leaders have promised sweeping changes to make the economy more competitive and efficient, including opening more industries to private and foreign competitors.
They have issued a steady drumbeat of minor changes in recent months such as making it easier to register a business but more basic change such as in the state-controlled banking system is politically fraught and could take years.
Last year's economic growth of 7.7 percent was the strongest of any major economy but tied 2012 for China's slowest expansion since the 1990s.
Weaker growth could have global repercussions, hurting Asian economies and others such as Australia and Brazil for which China is the leading market for iron ore, other commodities and industrial components.
Chinese imports suffered an unexpectedly sharp contraction of 11.3 percent in March in a sign of weak demand for raw materials in manufacturing and construction.