China focused stocks and exchange traded funds have not been great performers in 2013 but investors should not count them out completely. The rest of the year is looking promising for China’s economy.

China’s first quarter GDP came in at 7.7%, not far from the fourth quarter number at 7.9%, reports S&P Capital IQ. Most of the drop is a result of the tighter lending that banks are implementing for real estate and “non-productive” sectors. [Emerging Market ETFs: Investors Betting Against China]

“We believe China’s GDP growth is likely to pick up in the coming quarters as the first quarter is seasonally weaker for capital formation,” Lorraine Tan of S&P Capital IQ-Asia said, and, “as long as the U.S. recovery remains en route.” [The Case for China ETFs]

The slower expansion in the first quarter is “normal” as China sacrifices economic growth to make structural reforms, People’s Bank of China Governor Zhou Xiaochuan said in an interview at a meeting of the International Monetary Fund in Washington April 20. Bloomberg News reports that the iShares FTSE China Large-Cap ETF (NYSEArca: FXI) has experienced outflows of $256 million this month, after losing $824 million in March, the highest level since March. FXI is down 16.5% this year.

The fiscal stimulus that was set into action during the third quarter of 2012 has not materialized, and most spending plans were unable to gain financing. China’s industrial output has slowed in March to 8.9%, compared to 9.9% in January and February.

S&P Capital gives China a positive outlook for the rest of 2013, with seasonal buying a big support for near-future commodity buying. The ratings company is expecting the Shanghai stock exchange to rise about 28% by the end of 2013. [China ETFs for Jim Rogers Bullish View]