CHINA'S economy has expanded at the slowest pace in 2? years as export demand moderated and a prolonged campaign against property price gains cooled growth.
Gross domestic product rose 8.9 per cent in the fourth quarter from a year earlier, the statistics bureau in Beijing said.
Growth fell below 9 per cent for the first time since mid-2009. Industrial production in December increased 12.8 per cent from a year earlier.
The report may increase pressure on the Premier, Wen Jiabao, to tilt policies towards sustaining growth in the world's second-biggest economy, as policymakers predict a grim outlook for exports and inflation concerns diminish.
"Decelerating GDP growth will provide more room for policymakers to shift towards a pro-growth bias after an extended tightening cycle," said Jing Ulrich, chairman of global markets for China at JP Morgan Chase. "At this juncture, the challenge for policymakers is to implement measures that boost domestic demand without setting back progress made in curbing inflation."
Asian stocks rose after the report boosted speculation that the government may take extra measures to spur growth amid concerns about Europe's debt crisis.
Full-year economic growth slowed to 9.2 per cent from 10.4 per cent in 2010, the report showed.
"The data confirmed no hard landing is likely, more so given the loosening stance already adopted by the policymakers," Shen Jianguang, an economist at Mizuho Securities Asia, said. Still, there was "no room for complacency, given the risks of property sector meltdown and global crises". Mr Shen expects more loosening in credit, an expansionary fiscal policy and loosening in the property sector in the second quarter.
Banks including BNP, Nomura and UBS forecast weaker economic expansion this quarter as overseas sales moderate further and government measures to rein in property prices hurt demand for goods such as steel, cement and home appliances.
Fixed-asset investment excluding rural households expanded 23.8 per cent last year. Retail sales rose 18.1 per cent in December from a year earlier, the report showed.
The People's Bank of China last month allowed banks to set aside fewer deposits as reserves and new loans in December were the highest since April, signs the government is relaxing monetary policy to encourage lending even as it maintains curbs on the property market to bring down home prices.
A deeper recession in Europe, which may cause a sharper slump in demand for China's exports, and a "disorderly correction" in the property market were the biggest risks to the economy this year, Chang Jian, a Hong Kong-based economist at Barclays Capital, said.
The world's largest exporter may see shipment growth halve this year from 20 per cent in 2011, while property investment, which accounts for about a fifth of the nation's fixed-asset spending, may expand at half last year's rate, Mr Chang said.
Frequently Asked Questions about this Article…
What is China’s current GDP growth rate and how much has growth slowed?
China’s growth slowed in the latest readings: GDP rose 8.9% year‑on‑year in the fourth quarter, and full‑year expansion eased to 9.2% from 10.4% the prior year. The quarter’s growth fell below 9% for the first time since mid‑2009, signaling a clear deceleration.
How could China’s slowing growth affect Asian and global stock markets?
The report that growth is slowing has already lifted Asian stocks on speculation Beijing may introduce extra measures to spur growth. Slower Chinese growth can raise hopes for policy support while also increasing investor focus on global demand risks, such as Europe’s debt problems.
Which sectors are most exposed to China’s property market cooling?
Measures to rein in property prices in China hit demand for construction‑related and household goods. The article specifically notes weaker demand for steel, cement and home appliances, and that property investment makes up about one‑fifth of fixed‑asset spending.
What policy moves might China take to support growth, and what has it already done?
Economists cited in the article expect Beijing to shift toward a more pro‑growth bias, including looser credit, expansionary fiscal policy and some easing in the property sector. The People’s Bank of China has already allowed banks to hold fewer reserves and new loans in December were the highest since April, signs of a relaxed monetary stance to encourage lending.
What are the biggest risks to China’s economy that investors should watch?
Analysts highlight two main risks: a deeper recession in Europe that would sharply cut demand for China’s exports, and a disorderly correction in the domestic property market. Both could materially slow China’s expansion and affect global markets.
How might weaker export demand impact China’s shipment growth this year?
One economist quoted in the article warns shipment growth could halve this year from about 20% in 2011, reflecting moderating overseas sales. Several banks (BNP, Nomura, UBS) also forecast weaker economic expansion as exports moderate.
Is a hard landing in China likely according to economists quoted in the article?
Economist Shen Jianguang at Mizuho Securities said the data confirm a hard landing is unlikely, especially given the loosening stance already adopted by policymakers. However he cautioned there is no room for complacency because of property‑market and global risks.
What recent Chinese economic indicators should everyday investors note?
Key indicators in the report show industrial production up 12.8% in December year‑on‑year, retail sales rising 18.1% in December, and fixed‑asset investment excluding rural households up 23.8% for the year. These figures show underlying domestic activity even as headline GDP growth slows.
Call 1300 880 160
Start a chat
Schedule a call
