China's focus shifts inward as growth slows

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.