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Kevin Frayer | Getty Images

China's economic growth for the first three months of 2015 could well hit a multi-year low, experts say, increasing the pressure on Beijing to curb the marked slowdown.

Due on Wednesday, the world's second-largest economy is expected to show a 7 percent annual increase in its gross domestic product (GDP) in the first quarter , according to a Reuters poll, marking the slowest pace since the same period in 2009 and down from 7.3 percent in the previous three months.

The estimate is also lower than the country's 2014 growth of 7.4 percent - the lowest gross domestic product (GDP) that the mainland has seen in 24 years - but roughly in line with the " around 7 percent" target announced at the annual National People's Congress (NPC) last month.

Over the weekend, Chinese premier Li Keqiang said the nation faces increased downward pressure, which the government must "stand up to" in order to avoid an impact on employment and incomes.

"Real activity data were quite weak in the first two months this year. While some data, such as the purchasing managers' index (PMI), suggested that the momentum has picked up somewhat, other figures indicate that China [remains in a] difficult position," wrote Li-Gang Liu, ANZ's chief economist of Greater China, in a report. ANZ economists expect China's economy to expand only 6.9 percent in the first quarter.

Scheduled for release alongside the GDP data are figures for factory output growth, fixed asset investment and retail sales for March -- all of which could affirm the uncertainty over China's economic outlook.

Read More Big discounts ahead for China luxury shoppers

More stimulus to come

To prop up the country's growth, especially in its all-important property sector, the People's Bank of China (PBoC) loosened mortgage restrictions and eased property transaction tax end of last month. Prior to that, the central bank unexpectedly cut interest rates in February, after reducing the one-year benchmark lending rate by 40 basis points and the one-year benchmark deposit rate by 25 basis points last November.

Still, recent economic indicators continue to paint a tepid recovery picture in the Asian economic giant.

Exports for March posted a wider-than-expected tumble of 14.6 percent from a year ago, due to weak global demand and the impact of the Lunar New Year holiday. Consumer prices steadied at 1.4 percent in the same month, but analysts say the flatlining of inflation suggests that China is still growing slower than expected - in spite of the recent measures.

This leaves the door open to further easing. "Recent stimulus measures may not necessarily be fully reflected in activity [hence] that raises the prospects of more targeted easing," Mizuho Bank's analysts said.

Asian investment bank CLSA agrees and expects the PBOC to follow up with another interest rate cut as early as this month.

"Post the NPC, the government will be more aggressive in supporting the economy, with a rate cut this month. We anticipate the second quarter to be a better quarter," Francis Cheung, head of China & Hong Kong strategy at CLSA, said.

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australia & new zealand banking group limited

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Kevin Frayer | Getty Images China's economic growth for the first three months of 2015 could well hit a multi-year low, experts say, increasing the pressure on Beijing to curb the marked slowdown.

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why did china's GDP increase? reasons for it.

what policies/measures did China's gvt implement?

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1.1 Reasons for China's slow economic growth

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1.1 Reasons for China's slow economic growth

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-China’s economic growth rate is slowing down over the years, and this year, in the first quarter of 2015, the increase in its GDP hit a record low of 7.0 percent as compared to the previous 6 years.

-One of the reasons for China’s slow economic growth is due to slower growth in fixed-asset investment. These property investments contribute a huge part to China’s GDP, thus when the housing properties in China dropped below the expectations of consumers, it made the consumers more cautious of investing in such properties. Without investments, economic growth of a country would be unstable in the short term, and poor performance of investment can pressurized the economy.

-Another reason for China’s slow economic growth is due to its imports and exports falling. It was reported that imports plunged by 16.2% in April this year. The trade surplus expanded around 65% as imports fell 18.1% and exports fell 2.8%.

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-loosened mortage restrictions

-increased property transaction tax

-cut interest rates

Despite previous measures taken by China’s government to stimulate economic growth, it was not effective enough. In order to inject money into the economy, the Central People’s Bank of China has already reduced interest rates by more than 2 times since November 2014, and has also reduced the amount of cash in their reserve twice. By making such adjustment to the reserve requirements, “which is the amount of funds banks must hold against deposits in bank accounts”, (http://www.investopedia.com/ask/answers/07/central-banks.asp) the bank is capable of lending more money, and alongside with lower interest rates, there will be a greater supply of money in the economy, which will in turn boost economic activity.

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- cost of living, quality of life

- despite china having high gdp, their gdp per capita is low

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BEIJING (Reuters) - China's urban unemployment rate ticked down to 4.05 percent at the end of March from 4.1 percent at the end of 2014, the labor ministry said on Friday.

Facing slowing economic growth, Chinese authorities have said that avoiding mass unemployment is a crucial policy priority, although the urban jobless rate is widely known to understate the real unemployment figure, a point acknowledged by the government.

The government aims to create at least 10 million new jobs in 2015 and keep the urban jobless rate below 4.5 percent.

The urban unemployment rate hovered between 4 percent and 4.5 percent in the last decade, even during the global financial crisis, partly because it does not account for China's 298 million migrant labor.

To improve the data, the Chinese government has devised a new jobless rate that is compiled through surveys. The statistics bureau said last week that the survey-based jobless rate hovered around 5.1 percent.

China's annual economic growth slowed to a six-year low of 7 percent in the first quarter, hurt by a housing slump and a downturn in investment and manufacturing.

Authorities have rolled out a series of stimulus measures over the last year, including two interest rate cuts since November, to cushion the blow, but have indicated they may be willing to tolerate somewhat cooler growth if the labor market remains resilient.

(Reporting by Kevin Yao; Editing by Shri Navaratnam & Kim Coghill)

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But even the government knows that understates the real unemployment rate.

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-Urban unemployment rate -Ways to improve unemployment rate data -Reason why unemployment rate decrease -Why china uses "Urban unemployment rate"

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1. Urban unemployment rate from 2002 to 2015 -3.9%>4.1%>4.3%>4.2%>4.2%>4.1%>4%>4.2%>4.3%>4.1%>4.1%>4.1%>4.1%>4.1% 2. Trend of the urban unemployment rate from 2002 to 201 -The trend line of the urban employment rate was a decreasing trend from 2002 to 2015

3. Reasons to the changes of the urban unemployment rate -More availability of jobs 4. Why the unemployment rate for that certain year is high -Shortage of labor

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2.2 Why china uses the term "Urban unemployment rate"

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2.2 Why china uses the term "Urban unemployment rate"

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-sampling of the urban permanent residents is considered more reliable because migrants who cannot find jobs often return to their homes

-what China’s authorities measure are only those urban workers who are formally registered and thus eligible for unemployment benefits

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2.3 Reason why China's unemployment rate fell

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2.3 Reason why China's unemployment rate fell

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1. The real unemployment rate figure could have been understated by the urban jobless rate

2. More jobs could have been created by the government

3. However, the official unemployment rate may be understated because it excludes:

-Discouraged workers

-Part-time workers

-Underemployed workers

4. China's unemployment rate could have fallen due to lesser occurrence of Frictional,

Structural, Cyclical and Seasonal Unemployment

5.  People could have dropped out of the labor force, or fewer people decided to start

looking for work (Reference: http://blogs.wsj.com/numbers/why-did-the-unemployment-rate-drop-so-much-1341/)

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2.4 Ways to improve unemployment rate data

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2.4 Ways to improve unemployment rate data

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1. Implement Monetary Policy

2. Implement Fiscal Policy when Monetary Policy does not work

3. Reducing occupational immobility: Immobility is a cause of structural

unemployment

4. Reducing the geographical immobility of labour

5. Benefit and tax reforms

6. Boosting aggregate demand

7. Employment subsidies and/or employment tax cuts (demand-side policy)

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http://www.voxeu.org/article/china-s-unemployment-and-labour-shortage

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The Chinese labour market: High unemployment coexisting with a labour shortage

In China, both a labour shortage and unemployment have emerged as problems in recent years. The number of university students scheduled to graduate in June 2014 is 7.27 million, increasing with 280,000 from 2013 (MHRSS 2014). Following 2013 - at the time considered the most difficult year for job seekers in history - 2014 is expected to be even harsher. Problems in the labour market in China, which is a key region for Japanese companies advancing overseas, are also attracting attention in Japan. This paper provides a few perspectives on the Chinese labour market, which combines a labour shortage with challenges for job seekers.

Although a nationwide labour survey did not include unemployment rates, we will look at the Chinese labour market using statistics from job placement services. According to the latest statistics on job offers and applications, as of the January-March quarter of 2014, there were 1.293 million young job seekers who graduated in the last year or earlier but had yet to find a job through employment agencies in 102 major cities (MHRSS 2014). As the population of these major cities accounts for approximately 46.7% of the total population of large and mid-size Chinese cities, we can estimate that the number of young job seekers who have graduated, but have yet to find a job, totals more than two million.

Using data from the survey, I also tried to estimate the unemployment rate in those 102 major cities. I employed data on the working population in major cities and the number of job seekers who have not found employment (newly graduated unemployed persons and rural immigrant job seekers) based on the international standard set by the International Labour Organisation (see Figure 1).

Figure 1. Unemployment rate in major Chinese cities

: Calculated by the author from statistics on job placement services in China ( http://www.chinajob.gov.cn/).

The unemployment rate, including rural migrants in major cities in the first quarter of 2014, is 8.7%, while that excluding them is 6.9%. Unemployment rates before the first quarter of 2014 are also close to these numbers, suggesting that the high unemployment rate has continued.

The unemployment rate is high not because unemployed people lack the ability to work. Looking at the age distribution of all job seekers in these 102 major cities (of whom 96.0% are unemployed), workers aged 45 or younger account for 89.9% of the unemployed, indicating a large population of young workers. In addition, 54.7% of job seekers have specialist or vocational qualifications. Regarding the type of job, 44.1% of job seekers look for technical jobs, while 25.8% seek marketing, sales, or service jobs. There still exists abundant, high-quality labour in the Chinese labour market.

The high unemployment rate cannot be blamed for the sluggish job offers. Despite the slower economic growth, job offers from companies are still buoyant. As indicated in Figure 2, the job-offers-to-seekers ratio in the first quarter of 2014 was 1.1, showing that there are still more job offers than job seekers.

Figure 2. Job-offers-to-seekers ratio in China

: Statistics on job placement services in China ( http://www.chinajob.gov.cn/) and CEIC Database

With regard to the buoyant job offers, I demonstrated in my recent book (Liu, 2013a) that labour productivity is the most persuasive of the factors that have an impact on the job-offers-to-seekers ratio in China. As shown in search theory, the larger the income earned from a job, the larger will be the rate of return gained from job creation for companies, which will result in more job offers. Given that productivity in developing countries will improve through not only technological innovations on their own but also through their efforts to catch up with developed nations, a higher rate of increase in productivity can be expected. For that reason, even if the economy slows down somewhat, buoyant job offers are likely to continue because of the support for higher productivity.

So why do labour shortage and high unemployment co-exist in China? I analysed this in my book. More specifically, I explored the matching efficiency in the labour market by estimating the matching function between job offers and job seekers in urban labour markets in China based on search and matching theory.

Figure 3 shows the values of matching efficiency on the vertical axis. From the figure, we see that matching efficiency in China declined sharply from the late 1990s to the 2000s.

Figure 3. Matching efficiency in the Chinese labour market

A conceivable cause of the sharp decline is the increase of the inflow and outflow of workers into and out of companies, reflecting the establishment of new companies and the disappearance and downsizing of old state-owned enterprises following economic and corporate reforms, which led to friction in the labour market. This decline was also attributable to imperfect information between job offers and job seekers.

I also found that a rise in productivity has a significant negative impact on matching efficiency and showed that a mismatch has arisen between unemployed persons and companies seeking highly-skilled workers.

Lastly, although it was not dealt with by quantitative analysis in the book, a skill mismatch and a geographic mismatch have some bearing on this phenomenon.

For example, the job-offers-to-seekers ratio for security maintenance staff is surprisingly high in Nanjing at 4.0, while it is only 0.2 in Shanghai.

One way to improve matching efficiency is through employment agencies, as I find that the matching efficiency is very high in areas where there are many employment agencies. As employment agencies are organisations that provide information mainly on job offers and job seekers, they are useful for increasing matching efficiency by correcting imperfect information. Although it is, of course, difficult to increase substantially the number of employment agencies in a short period of time, it would be beneficial for companies to put more efforts into recruiting activities in order to bring many job seekers and secure the labour force.

Although the coexistence of unemployment and labour shortage is seemingly contradictory, it is observed in labour markets not only in China but also in many other countries. Even though it is impossible to eliminate imperfect information in the actual economy, there is room for improvement. If the matching efficiency in the labour market increases, it seems possible to lower both the labour shortage and the unemployment.

The main reason why Japanese companies invest overseas has already shifted from cheap labour to local demand for products. The "Survey of Overseas Business Activities" of the Ministry of Economy, Trade, and Industry (2014) shows that while the percentage of Japanese companies that place emphasis on cheap labour has fallen to 21.4%, the percentage of companies that value demand for products in a country which they have entered, and its three neighbouring countries, is 66.7% and 27.4%, respectively. The abundant university-educated labour force that exists in China despite the labour shortage appears to create favourable conditions for Japanese companies - emphasising the quality of human capital and innovation in an investment destination.
Editors' note: This column was reproduced with permission from the Research Institute of Economy, Trade and Industry (RIETI).
Ministry of Economy, Trade and Industry (2014), " Survey of Overseas Business Activities ".

MHRSS (2014), Ministry of Human Resources and Social Security of the People's Republic of China, China Employment.

Liu, Y (2013a), China's Urban Labour Market: a Structural Econometric Approach, Kyoto University Press & Hong Kong University Press.

Liu, Y (2013b), " Labour Market Matching and Unemployment in Urban China", China Economic Review, Vol.24, pp.108-128.

1 The full name of the unemployment rate reported in China is the 'registered unemployment rate', which includes only unemployed persons registered by the government. One of the conditions required for registration is the urban household registration. As it is difficult to acquire the urban household registration outside of one's birthplace, it is believed that there are many people who are not included in the registered unemployment rate although they are effectively unemployed.

2 For job seekers, those who take on a job are tallied in an independent statistical item. Therefore, they are not included in an item such as rural immigrant job seekers.

3 In China, as workers with rural household registration are given the right by the government to use land, they are assumed to have an agricultural profession. However, as their family already is farming, there are people who cannot take on an agricultural job and, as a result, there is a surplus of labour among them. Despite the right to use land, they do not engage in agriculture effectively and look for work in the cities. Therefore, in this column, two unemployment rates are calculated by distinguishing these job seekers in rural areas.

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China's unemployment and labour shortage

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In China, both unemployment and a labour shortage have emerged as problems in recent years. This column explains their co-existence by a decrease in the matching efficiency in the labour market. One way to improve the matching efficiency, though difficult to implement in the short-run, is through the creation of more employment agencies.

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Points on Unemployment based on the main article 

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Points on Unemployment based on the main article 

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- Avoiding mass unemployment is a crucial policy priority, although the urban jobless rate is widely known to understate the real unemployment figure

- China's urban unemployment rate ticked down to 4.05% at the end of March from 4.1% at the end of 2014

- One solution to stabilizing the urban unemployment rate would be to create more job opportunities for the people of China. One example to substantiate this would be based on the fact that the government aims to create at least 10 million new jobs in 2015 and keep the urban jobless rate below 4.5%

- Surveys are important for keeping track of data

The urban unemployment rate hovered between 4% and 4.5% in the last decade, even during the global financial crisis, partly because it does not account for China's 298 million migrant labor

To improve the data, the Chinese government devised a new jobless rate that is compiled through surveys

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SHANGHAI (Reuters) - China's inflation data for March produced small positive surprises, but remained tepid, with little sign that Beijing's easing measures to date have significantly cut worrisome deflationary pressure.

That has led many to predict more easing measures in the pipeline, including more cuts to reserve requirement ratios for banks, although there is debate over how effective those might be at juicing inflation.

In March, China's annual consumer inflation rate (CPI) stayed flat at 1.4 percent, above a poll's projected 1.3 percent. Producer prices (PPI) fell slightly less than projected, contracting 4.6 percent rather than the forecasted repeat of February's 4.8 percent pace.

The March inflation data is the first in a batch of key economic data that will climax with release of first-quarter growth numbers on April 15. A Reuters poll expects growth to be a six-year low of 7 percent.

PRESSURE ON MARGINS

PPI has now been in negative territory for three years, highlighting sustained pressure on profit margins at Chinese companies - in particular heavy industry - as Beijing struggles to restimulate headline growth.

The higher-than-expected CPI was driven by a sudden rise in pork prices, which been a drag on CPI every month since December 2013.

But consumer inflation is still far short of Beijing's official 3 percent target for 2015, and some economists see that goal at risk.

"Consumer price inflation held steady in March but we expect a drop in food price inflation to pull it lower over the coming months," wrote Julian Evans-Pritchard of Capital Economics in a research note.

Producer prices were dragged down again by mining and raw materials components.

Friday's data follows a surprise recovery in manufacturing activity for March, with the official Purchasing Managers' Index (PMI) edging up to 50.1, in expansionary territory, from February's 49.9.

WORRIED POLICYMAKERS

Policymakers have publicly expressed worry that the risk of deflation is rising for the world's second-largest economy, as the drag from a property market downturn and widespread factory overcapacity is compounded by an uncertain global outlook and soft commodity prices.

But while lower commodity prices have punished the extraction and power production sectors, the pain is not felt across the board, as some companies have taken advantage of lower input costs to maintain profit margins.

The People's Bank of China (PBOC) has made multiple cuts to guidance lending rates, and one cut to reserve requirement ratios at banks. It also launched a long-awaited deposit insurance program in April, but economists said those moves have had little impact on real borrowing costs.

"The weak inflation profile suggests that further monetary policy easing is still needed in spite of recent retreats of onshore money market rates," ANZ economists Zhou Hao and Liu Ligang wrote after Friday's data release.

"We believe that only permanent liquidity injection will be able to sustain the current favorable monetary conditions to head off the risk of deflation," they said.

The central bank has guided benchmark short-term money rates down sharply in recent weeks, and the interest rate yield curve has risen and steepened slightly as short term rates have fallen while longer term expectations have risen.

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China inflation flat in March, producer pricing power stays weak

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SHANGHAI (Reuters) - China's inflation data for March produced small positive surprises, but remained tepid, with little sign that Beijing's easing measures to date have significantly cut worrisome deflationary pressure. That has led many to predict more easing measures in the pipeline, including more cuts to reserve requirement ratios for banks, although there is debate over how effective those might be at juicing inflation.

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Factors Affecting Inflation Rate

Policies to overcome deflation

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1) Pork Price Inflation

-Demand for pork during Chinese New Year. People rush to buy things needed for Chinese New Year, causing an increase in prices of pork.

-CPI in china depends heavily on pork prices.

-The meat China citizens people prefer, is pork, thus pork makes up a huge component in the consumer basket.

-To push up China’s consumer index, pork prices are increased.

2) fall in food price

-There is a drop in global oil prices.

3) Excess supply of industrial goods (pushing prices down) -China’s excess manufacturing capacity brings down the costs of many goods and services.

-Excess supply of materials used in the real estate boom is pushing prices down.

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-multiple cuts to guidance lending rates

-“The People's Bank of China (PBOC) has made multiple cuts to guidance lending rates, and one cut to reserve requirement ratios at banks.” Even though the government has tried to minimise the consequences of the borrowing costs for the people of China but economists said these cuts have had little impact on real borrowing costs. Instead, the central bank should make a short-term loan to financial institutions. If the government do not do introduce more effective policies, the economy will still continue to be under recession.

-deposit insurance program

The People’s Bank Of China also launched a long-awaited deposit insurance program in April as part of their attempt to reduce the magnitude of the borrowing costs’ issue. Under this programme, the People’s Bank Of China can adjust the maximum amount of compensation according to the situation and potential risks, according to the regulations. Through this, the government hopes to protect its citizens’ finance. This proves that the China government are actually trying their best to help its economy recover and also, the government cares a lot for its citizens.

-Policies to expand social security

“China's State Council, the cabinet, said it would allow the national security fund to expand its investment scope to diversify risk, stabilize and increase investment returns.” From here, we can see that the China government is trying very hard to help its economy recover as by expanding the national security fund’s investment scope, it can not only secure and increase profits, but it also becomes a key determinant in stabilizing the economic growth of China and adjusting its economic structure.