China Reports Slowest GDP Growth in 10 Years

China this week reported that its economy grew by 6.1% year over year for the first quarter of 2009. While the growth rate is quite respectable by most standards, it is the slowest for China in 10 years. To put it in context, the economy grew by 10.6% in the year-ago quarter, and by 6.8% in the fourth quarter of 2008 after exports to most major markets slumped amid the global financial crisis. According to the official data, industrial output, fixed asset investment, and retail sales all posted healthy growth in the quarter. A more encouraging sign, in our opinion, is that power consumption--which is closely followed as a more accurate gauge of economic vitality--declined at a slower pace, down by 3.5% in the March quarter, compared with double-digit declines in the last few months of 2008. While some data have emerged to suggest the initial positive impact of fiscal stimulus spending on the economy, we think it's too early to predict the worst is over, as the key to sustainable growth in China will be structural changes in the economy, which will take a much longer time.

Other key economic data released this week included the wholesale and retail prices for March. The consumer price index fell by 1.2% year over year and the producer price index was down by 4.6%.

Market Recap
Comments from the central bank that monetary policy will continue to be accommodating helped boosted investor confidence. After five trading days, the Shanghai Composite Index rose by 2.5% to 2,504, while the Shenzhen Composite Index also rose by 2.5% to 9,580.

Macroeconomic and Financial
Bank Lending Exploded in the First Quarter
In March alone, RMB bank loans grew by CNY 1.89 trillion ($276 billion) from the previous month, according to the central bank's statistics. Altogether, Chinese banks in the first three months of 2009 lent out CNY 4.58 trillion, which covered 90% of the lending quota previously set for the year. The alarming rate of growth in lending prompted the banking regulators to conduct checks on the flow of bank loans to prevent the money from going in the stock market for speculation.

Technology
Chinese Electrical Appliance Makers Tapped Vast Rural Markets
Rural consumers bought CNY 4 billion of electronics products (mostly white goods, computers, and handsets) in the first quarter of 2009, after the government started offering discounts on those products to stimulate demand. In March alone, sales of such products rose by 70% from February, according to statistics from the Ministry of Commerce.

Industrial
Automaker BYD to Showcase Electric Car at  Berkshire Hathaway (BRK.B) Annual Meeting in May
The model to be on display is F3DM, which is a mass-produced plug-in hybrid. The car went on the market last December with a price tag of CNY 150,000 ($22,000).

Contributions from Lun Lu, Iris Tan, and Peter Liu.