China data show economy remains stuck in soft patch

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A slew of unexpectedly weak data out of China confirms the world's second largest economy is stuck in a soft patch, say economists.

China's industrial output rose 8.7 percent in April from the year-ago period versus Reuters expectations for a 8.9 percent rise, data showed on Tuesday.

Retail sales rose an annual 11.9 percent, against a Reuters forecast of a rise of 12.2 percent.

Fixed asset investment grew 17.3 percent in the first four months from a year earlier, just a tad lower than Reuters estimate of 17.7 percent.

"It's uniformly disappointing and shows broad weakening of momentum across the board," Dariusz Kowalczyk, senior economist at Credit Agricole told CNBC.

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"This is not overly surprising as it takes time for government stimulus to work through to the real economy," he said. In the recent weeks, the government has hastened construction of railways and affordable housing and cut taxes for small firms to bolster the slowing economy.

Credit Agricole expects gross domestic product growth (GDP) to slow to an annual 7.3 percent in the second quarter, down from 7.4 percent in the previous three months.

Zhiwei Zhang, chief China economist at Nomura, expects the slowdown will be even more severe, forecasting growth of just 7.1 percent for the April-June period from the year before.

Will Beijing step in with stimulus?

Market hopes for fresh stimulus were dampened after President Xi Jinping said at the weekend the economy must adapt to a "new normal" in the pace of growth, in comments some analysts say could mean Beijing is unlikely to step in with broad stimulus measures.

China is still in a "significant period of opportunity," but must take "timely countermeasures to reduce potential negative effects," he was quoted saying by the Xinhua news agency.

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However, Zhang continues to expect the government to loosen monetary policy in the second quarter by cutting the reserve requirement ratio (RRR) for banks by 50 basis points.

Decreasing the amount of cash that lenders must hold as reserves tends to stimulate economic activity as they have more assets to loan out.

"The pressure for more policy easing continues to build. We expect activity indicators to continue to weaken in May," Zhang said. "If policy easing does not take place in the second quarter, we see downside risks to our GDP forecast of 7.5 percent in second-half."