By Leigh Thomas
PARIS (Reuters) - Chinese economic growth data this week will offer the clearest indication yet of whether the world's second-largest economy will dodge a "hard landing".
A weak Chinese gross domestic product growth reading may impact emerging markets which are just beginning to get over concerns about the United States winding down its exceptional monetary policy stimulus of recent years.
Economists polled by Reuters expect data due on Wednesday to show Chinese growth slowed to 7.3 percent in the first quarter from 7.7 percent in the final three months of 2013.
If forecasts are borne out, that would be the slowest pace of growth in five years and near the minimum level needed to ensure stable employment.
"Anything else but an accelerated growth slowdown would be a surprise as both soft survey data and hard numbers were already signaling a weak start to the year," economists at UniCredit wrote in a research note.
The International Monetary Fund warned last week on the risk of a "hard landing" in China. Though it gauged the risk to be small, it said there could be big negative repercussions for other emerging markets.
Beijing is in the process of reforming the Chinese economy to let market forces play a greater role while trying to get consumption to bear more of the burden of boosting growth which so far has been underpinned by an investment boom.
More policy action is expected from the Chinese government after it announced plans last week to fast-track spending on railways, affordable housing, and tax cuts for small firms.
Investment and retail sales data, to be released alongside GDP, could point to weakness in domestic demand as Beijing clamps down on the shadow financing and public-sector extravagance. Housing data on April 18 may provide fresh signs of cooling in the property sector.
A weak GDP reading could also prompt the Chinese central bank to tweak monetary policy. The People's Bank of China is expected to rely on its open market operations to keep money market rates at levels aimed at helping the economy.
WHAT'S ON CENTRAL BANKERS MINDS?
The U.S. Federal Reserve may offer clues this week about how soon to expect interest rate rises with its chief Janet Yellen due to give a speech at the Economic Club of New York on Wednesday.
Minutes from the last Federal Open Market Committee (FOMC) meeting suggested that policymakers were not in a rush to tighten policy when the Fed's bond buying program ends later this year.
How fast the Fed withdraws its unprecedented monetary stimulus is one of the burning questions for the world economy with risks high if it gets it wrong, said economist Dario Perkins at Lombard Street Research in London.
"If the Fed keeps policy as loose as its forecasts suggest, it could create new asset-price bubbles," he wrote in a research not. "Exiting faster might counter these risks, but neither the FOMC nor markets seem prepared for this."
U.S. retail sales for March could give an idea of just how much strength the world's biggest economy had when the first-quarter ended.
Data such as employment and auto sales suggest considerable strength, which feeds into the theme of faster U.S. economic growth in the second quarter and bolsters the argument that a slowdown in the first quarter growth was due to exceptionally bad winter weather.
U.S. consumer price inflation data due on Wednesday will also be closely watched, especially after the surprisingly high producer price inflation reported Friday.
Persistently low inflation is often cited as a reason why the Fed will hold off raising interest rates until late next year.
However, it is in the euro zone that low inflation is particularly a concern for central bankers with final consumer price data for March due on Wednesday.
Economists reckon that inflation in the euro zone hit a trough of 0.5 percent last month, well below the European Central Bank's target of close to but less than 2.0 percent.
Any thing less than 0.5 percent in a final March inflation reading due would likely prove unsettling to markets and central bankers alike.
"We think the ECB will remain ready to act should inflation surprise to the downside," Barclays economist Fabio Fois said.
The ECB has pledged to launch unprecedented monetary stimulus similar to that already under taken in the U.S. and Japan if inflation remains low in the coming months.
(Reporting by Leigh Thomas, Additional reporting by Kevin Yao in Beijing and Lucia Mutikani in Washington)