CHINA’S economy expanded 7.4 percent between January and March, its slowest pace in 18 months, prompting the government to act quickly to shore up growth.

Just hours after the National Bureau of Statistics released the data, the State Council said China would reduce the amount of cash some rural banks hold at the central bank to help the farm sector.

The relaxation of reserve requirements comes just two weeks after China took its first step this year to bolster its slowing economy — cutting taxes for small firms and speeding up investment in railways.

The State Council also said tax incentives will be offered to companies employing those who have been out of work for more than one year.

The first quarter’s growth exceeded market expectations but was below the government’s 7.5 percent target and the previous quarter’s 7.7 percent. Gross domestic product amounted to 12.82 trillion yuan (US$2.08 trillion) in the first three months, the statistics bureau said.

Growth was led by a 7.8 percent increase in the service sector, while manufacturing rose 7.3 percent and agriculture 3.5 percent.

Bureau spokesman Sheng Laiyun said economic growth remained stable with more jobs being created and a steady rise in incomes.

“China’s slowing growth rate serves well the purpose of economic restructuring ... It is like driving uphill, and good drivers know that you have to shift to a slower speed to manage a stable but powerful ride.”

Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said that while first-quarter growth had slowed, growth momentum had stabilized in March as some activity data had improved.

Industrial production gained 8.8 percent year on year last month, compared with 8.6 percent in the January-February period. Retail sales accelerated to 12.2 percent in March, compared with the previous 11.8 percent reading.

“In addition, port throughput data also suggest that China’s trade may have bottomed out, and will become more resilient than what the current headline numbers show,” Zhou said.

Zhou, speaking before Premier Li’s statement, said he expected the growth rate to pick up in the second quarter with the stimulus measures announced earlier taking effect.

“The strength of the cyclical upturn, however, will hinge on whether the central bank can lower the funding costs facing enterprises.”

Chang Jian, a Barclays economist, also said the data indicated early signs of recovery. “The performance came in slightly better than expected,” Chang said.

“This may reduce market worries about a much sharper slowdown following the weak money supply and trade data release.”