China recorded its lowest growth in a quarter of a century last year, an AFP survey has forecast, projecting a further slowdown in the world’s second-largest economy this year.
Official GDP statistics for last year are to be announced tomorrow, and the median prediction in the poll of 18 economists put expansion at 6.9 percent — down from 7.3 percent the year before.
The figure would be the weakest growth since the 3.8 percent of 1990, a year after the bloody Tiananmen Square Massacre rocked the country and isolated it internationally.
Growth is set to slow further this year, the survey forecast, with the median projection coming in at 6.7 percent.
One bank, Nomura Holdings Inc, forecast a precipitous drop to 5.8 percent.
“The real economy will continue the downturn because of destocking, the reduction of overcapacity and deleveraging,” Nomura economist Zhao Yang (趙揚) said, citing in particular declining investment in property, a key sector.
“I don’t think economic growth will bottom out in 2016,” he said. “It will be under rather big downward pressure for the next two to three years.”
Chinese authorities struggled to keep control of a bucking stock market last year, weakening investor confidence in policymakers’ abilities to implement reform and manage the transition to a more market-driven economy. An oversupply of empty housing in second-tier cities and stubborn overcapacity in industries dominated by legacy state-owned enterprises continue to weigh on growth.
The expansion slowdown has stalled Beijing’s efforts to move the country’s economic model away from reliance on exports and infrastructure investment toward consumer spending. Even so, some analysts believe that markets have overreacted to negative factors and underestimated the fundamental resilience of China, whose official growth rates still far exceed those of the developed world.
In the AFP survey, economists forecast last year’s fourth-quarter growth at 6.8 percent, down from 6.9 percent in the previous three months — when US growth stood at 2.0 percent.
“In spite of the strong global market response to the rout on China’s equity market, we do not expect the equity slump to have a major impact on China’s real economy,” Hong Kong-based Oxford Economics economist Louis Kuijs said in an e-mail. “Indeed, we think that global markets have overreacted.”
Oxford Economics expects growth to slow to 6.3 percent this year, again pointing to the property sector, but added: “Those pressures remain cushioned by robust consumption.”
The forecast in the AFP poll was close to the official growth target of “about 7 percent” for last year — but questions have repeatedly been raised about the accuracy of official Chinese economic statistics, which critics say can be subject to political manipulation.
Last month’s export figures that came in ahead of expectations last week also prompted doubts about whether over-invoicing, which can be used to hide capital flight, was responsible.
The world’s biggest trader in goods saw its two-way business fall 8 percent year-on-year to US$3.96 trillion last year, the figures showed, far below the government’s target of 6 percent annual growth.
At a meeting of G20 officials last week, China’s top diplomat Yang Jiechi (楊潔篪) warned that “it is impossible to completely discard the possibility that an economic crisis could once again take place, and the problem should not be neglected.”
Unexpected moves in the yuan exchange rate — after a surprise devaluation in August last year — have disturbed investors in recent weeks, who worry that the real picture is worse than portrayed and authorities are trying to boost the competitiveness of domestic manufacturers. Analysts forecast a rocky year ahead.
“The ongoing deleveraging process, sluggish external trade outlook and soft domestic demand will continue to weigh on growth,” said Louis Lam (林慕爾), China economist from ANZ Research.
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