Wed, Jan 21, 2015 page15

• Chinese GDP growth hits 24-year low

  BELOW TARGET: Policymakers continue to face growth challenges this year — from a weak property market to overcapacity, slowing investment and erratic exports

  • Reuters, BEIJING and SHANGHAI
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  China’s economic growth held steady at 7.3 percent in the fourth quarter compared with a year earlier. While it was slightly better than expected, it was close to its weakest since the global financial crisis, keeping the pressure on policymakers to head off a sharper slowdown.

  The world’s second-largest economy grew 7.4 percent for the whole of last year, China’s National Bureau of Statistics said yesterday, undershooting the government’s 7.5 percent target and its weakest expansion in 24 years.

  It was the first since 1999 that the government had missed a yearly growth target for GDP.

  

  Sewers work at an export garment factory in Hefei, Anhui Province, China, on Monday.

  Photo: Reuters

  The statistics bureau said at a news conference that the economy faces difficulties, but it will keep growth within a “reasonable range.”

  A series of incremental market reforms and modest stimulus measures over the year did little to reverse a slowdown in the property market, and industrial overcapacity, slowing investment and erratic exports remain challenges for policymakers this year.

  However, if Beijing’s goal was to allow a modest slowdown to push painful reforms without setting off a collapse, then last year could be viewed as a qualified success; reported unemployment rates remained low and social unrest appears contained for now.

  “This is the best possible miss you could have from a messaging standpoint,” said Andrew Polk, economist at the Conference Board in Beijing.

  “The government is saying: ‘We’re not married to this specific target; we missed it and we’re okay.’ That seems to me a quite positive development,” Polk said.

  However, he added that the GDP figure was difficult to square with some of the negative underlying numbers.

  On a quarterly basis, the economy expanded 1.5 percent sequentially in the fourth quarter, slower than forecasts of 1.7 percent growth and 1.9 percent in July to September.

  While growth in industrial output and retail sales last month pipped expectations, power output rose only slightly from a year earlier, while fixed-asset investment was a bit cooler.

  Policymakers showed increasing signs of discomfort in the second half of the year as economic indicators began to consistently surprise on the down side, culminating in an unexpected cut to guidance lending rates by the central bank in November.

  The People’s Bank of China has also tinkered with the money supply while refraining from a full cut to banks’ reserve requirement ratios (RRR).

  An RRR cut could flood the market with about 2.4 trillion yuan (US$386.27 billion) in fresh cash when accounting for the multiplier effect of fresh loans, but some worry the money could simply be rerouted into sustaining the very industrial overcapacity and property bubbles that regulators have been fighting to suppress.

  However, the targeted easing measures have yet to show much effect in bringing down financing costs, and thus many now see further interest rate cuts and/or lower reserve requirement ratios as unavoidable if conditions do not improve soon.

  Beijing has ruled out massive stimulus as China is still struggling to digest a mountain of debt left over from the 4 trillion yuan stimulus package in 2009.

  Economists polled by Reuters had expected fourth-quarter growth to cool to 7.2 percent from 7.3 percent in the third quarter, hitting the lowest since the first quarter of 2009, when growth slowed sharply to 6.6 percent.

  Factory output rose 7.9 percent last month from a year earlier, versus expectations for a 7.4 percent increase and November’s 7.2 percent, other data showed yesterday.

  Retail sales rose 11.9 percent last month from a year earlier, above analysts’ predictions of 11.7 percent.

  Fixed-asset investment, a key growth driver, climbed 15.7 percent for the whole of last year, below forecasts of a 15.8 percent increase and hovering near a 13-year low.
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