Gross domestic product (GDP) expanded by 6.1 percent year on year in the first quarter, official data showed Thursday.

    The quarterly growth rate was the lowest in 10 years, as the global downturn held back the world's fastest-growing economy. The rate was 4.5 percentage points lower than the first quarter of 2008 and 0.7 percentage point lower than in the fourth quarter.

    GDP reached 6.5745 trillion yuan in the first quarter, Li Xiaochao, spokesman of the National Bureau of Statistics (NBS), told a press conference.

    POSITIVE SIGNS

    Li said the government's stimulus measures had produced positive results and the first-quarter performance was better than expected.

    First-quarter industrial output grew 5.1 percent year on year with a rise of 8.3 percent in March alone. Fixed-asset investment rose 28.8 percent in nominal terms to 2.81 trillion yuan. In real terms, fixed-asset investment rose more than 30 percent.

    In the first two months alone, investment in new projects rose 87.5 percent from a year earlier, with railway spending alone more than doubling. Rail projects comprise the single biggest component of stimulus spending.

    Agriculture production was forecast to continue increasing for a sixth year, with the area of grain crops to reach 1.08 trillion hectares, the NBS said. No percentage change for this figure was provided.

    First-quarter retail sales grew 15 percent to 2.94 trillion yuan.

    The per capita quarterly disposable income of urban residents rose 10.2 percent in nominal terms to 4,834 yuan for the first quarter, while that of rural residents climbed a nominal 8.6 percent to 1,622 yuan, the NBS said.

    The NBS figures follow other positive economic signs. Sales of vehicles and home appliances, for example, rose in the first quarter. According to China Association of Automobile Manufacturers, vehicle sales hit 2.68 million units in the first quarter, the highest in the world.

    Sales of home appliances in March were up 72 percent from February to 2.24 billion yuan, according to the Ministry of Commerce.

OTHER SIGNS SHOW WEAKNESS

    But other economic indicators showed declines. The consumer price index, a main gauge of inflation, fell 1.2 percent year on year in March, compared with a decline of 1.6 percent in February, the first monthly fall since December 2002. And the producer price index, a measure of inflation at the wholesale level, fell 6 percent in March.

    Declines slowed in power consumption, an important indicator of industrial activity. It dropped 3.49 percent in March, compared with an 11.37-percent decline in December last year. Power use fell 5.2 percent in the January-February period, according to the China Electricity Council.

    Many Chinese statistics for the first two months were released as a unit, partly because of the change in the Lunar New Year, which this year fell in January instead of February.

    According to the State Grid Corporation of China, power consumption rose 1.3 percent year on year in the first 10 days of March, but then fell 2.2 percent in the second 10 days and 2.7 percent in the last 10 days. The first 10 days of April showed a year-on-year drop of about 3.57 percent.

    Zhang Liqun, a researcher with the Development Research Center of the State Council (cabinet), said statistics for March trade, real estate sales and fiscal revenue showed positive signs. By that, he meant that the rate of decline had in many cases eased. The effects of the government's stimulus package would become more evident in the second quarter, he said.

    REMAINING DIFFICULTIES

    "We should not be too optimistic about these changes as the economic outlook is still grave," said Wang Tongsan, an economist with the Chinese Academy of Social Sciences (CASS), a government think tank.

    The NBS spokesman said the main barriers to recovery included slumping export demand, falling corporate profits and fiscal revenue and what the Chinese leadership has described as a "grave" situation for employment.

    During the first quarter, foreign trade dropped 24.9 percent to428.7 billion U.S. dollars. Exports were down 19.7 percent to 245.5 billion U.S. dollars. Imports slumped 30.9 percent to 183.2 billion U.S. dollars.

    Actual foreign direct investment stood at 21.8 billion U.S. dollars, down 5.6 billion U.S. dollars from same period of last year.

    China's major trading partners are still facing economic difficulties. U.S. retail sales fell 1.1 percent in March, when economists were looking for a 0.3-percent gain. Japanese industrial output fell a seasonally adjusted 9.4 percent in February from the previous month, which marked a fall for the fifth month running, the longest slump since 2001.

    Yao Jingyuan, NBS chief economist, said external demand remained "the most volatile factor" in the country's economic development.

    Corporate earnings shrank as economic growth slowed. The Aluminum Corp. of China (Chalco) reported a 99.9-percent plunge in full-year net profit to 9.2 million yuan in 2008. Yunnan Copper posted a 2008 loss of 2.79 billion yuan because of lower metal prices and the write-down of inventories.

    Tax cuts intended to spur the economy and the financial markets reduced government revenues. First-quarter fiscal revenue fell 8.3percent to 1.46 trillion yuan.

    In the first two months, the number of newly employed people in urban areas reached 1.62 million, down 210,000 from the same period of 2008. The employment of college graduates in their first jobs fell to 20 percent in the first quarter from the historical average of 70 percent.

RECORD HIGH CREDIT

    Bank credit rose rapidly in the first quarter. Credit extended by banks hit 4.58 trillion yuan, representing about 90 percent of the annual target.

    Premier Wen Jiabao said on March 5 at the opening of the annual session of the National People's Congress, the national legislature, that new yuan-denominated loans this year were expected to reach 5 trillion yuan.

    In March alone, new yuan-denominated loans increased 1.89 trillion yuan. It was the third straight month that new loans exceeded 1 trillion yuan.

    Medium- and long-term loans accounted for more than half of the new bank credit in March. These loans, unlike much short-term borrowing, would help the real economy to recover, said analysts.

    The monetary policy committee of the People's Bank of China, or the central bank, said at its first-quarter meeting that it would continue to pursue an "appropriately easy monetary policy" in coming months to boost investor confidence.

    The central bank has cut interest rates five times and reduced banks' required reserve ratio four times since September.

    Zuo Xiaolei, chief economist with Galaxy Securities, said there would be no interest rate cuts in the short term, because investment was not being affected by the cost of credit but investor confidence.

    That view was supported by Wang Xiaoguang, an economist with the National Development and Reform Commission, the country's top economic planner. He said the declines in the CPI and PPI didn't indicate that there was a deflation problem in China, and it wouldn't be necessary to cut interest rates further in the short run.

    HAS ECONOMY BOTTOMED OUT?

    Economic growth in China, although slower than for many years, still stands in sharp contrast with recessions in other major economies. The Organization for Economic Cooperation and Development predicts 6.3 percent growth for China this year, compared with a 4-percent contraction in the United States and a 6.6-percent decline in Japan.

    The latest World Bank forecast for China's 2009 GDP growth was 6.5 percent.

    Chinese economists, however, are confident the country will realize its 8-percent target for this year, although they admitted that would depend partly on whether demand in major trading partners recovers.

    Despite uncertainties, the country will achieve its GDP goal as the economy has strong fundamentals and potential to grow. If the government is not satisfied with the second-quarter performance, it will probably apply further fiscal stimulus, said Jia Kang, a researcher with the Ministry of Finance.

    Possible new measures included increased spending on rural development and agricultural production, he said.

    Zhang Yaxiong, a researcher at the State Information Center, said he was skeptical about the potential for medium-term growth, because the government still needed to do more to boost consumption.

    An analyst with CITIC Securities, who asked not to be identified, said the economy had shown signs of reaching or approaching the bottom, but it was too early to decide what had happened until the second-quarter figures were released.

    "Some first-quarter figures are positive signs, but [they] only indicate the pace of contraction is slowing." he said.

    (Xinhua reporters Jiang Guocheng and Liu Zheng contributed to this story)