China growth hit 24-year low in 2014

The Pak Banker - - FRONT PAGE -

China s an­nual GDP growth slowed to its weak­est rate in more than two decades in 2014, ac­cord­ing to an AFP survey, pro­ject­ing fur­ther de­cel­er­a­tion in the world s sec­ond-largest econ­omy this year.

The me­dian fore­cast in a poll of 15 econ­o­mists saw the Asian gi­ant s gross do­mes­tic prod­uct (GDP) ex­pand­ing 7.3 per­cent last year, down from 7.7 per­cent in 2013.

That would be the worst full-year re­sult since the 3.8 per­cent recorded in 1990 -- the year after the Tianan­men Square crack­down. The Na­tional Bureau of Statis­tics (NBS) re­leases the of­fi­cial GDP fig­ures for the fourth quar­ter and the whole of 2014 on Tues­day.

For this year, the econ­o­mists see growth slow­ing fur­ther to a me­dian 7.0 per­cent, as Chi­nese lead­ers pro­claim a "new nor­mal" of slower ex­pan­sion and em­pha­sise eco­nomic re­forms.

"China may in­tro­duce many re­struc­tur­ing and re­form mea­sures this year and this may have some neg­a­tive im­pact on eco­nomic growth," ANZ economist Liu Li-Gang told AFP.

He said that they might in­clude changes to state-owned en­ter­prises, fi­nan­cial re­forms such as in­ter­est rate lib­er­al­i­sa­tion and looser re­stric­tions on pri­vate banks.

China, a main driver of global growth, was be­set last year by prob­lems rang­ing from weak­ness in man­u­fac­tur­ing and trade to fi­nan­cial wor­ries over ris­ing debt lev­els and fall­ing real es­tate prices, which have sent shock­waves through the key prop­erty sec­tor. For Oc­to­ber to De­cem­ber 2014, the survey saw GDP as hav­ing risen a me­dian 7.2 per­cent year-on-year. That would be marginally weaker than the third quar­ter s 7.3 per­cent, and the worst quar­terly re­sult since the first three months of 2009, when growth logged a 6.6 per­cent ex­pan­sion dur­ing the global fi­nan­cial cri­sis.

Au­thor­i­ties ap­peared to take last year s per­for­mance largely in their stride, stick­ing to a sce­nario whereby the coun­try s con­sumers take the lead in un­der­pin­ning ex­pan­sion in com­ing years, em­pha­sis­ing in pub­lic state­ments the qual­ity of growth rather than its size. "China has en­tered a new nor­mal of eco­nomic growth," Li Baodong, a vice for­eign min­is­ter, told re­porters on Fri­day, re­peat­ing a newly favoured phrase of the coun­try s lead­ers. "That is to say we are go­ing through struc­tural adjustment and the struc­tural adjustment is pro­gress­ing steadily."

Pur­vey­ors of high-qual­ity con­sumer goods such as neigh­bours Ja­pan and South Korea, as well as Europe and the United States, could stand to ben­e­fit from the re­mod­elling of the econ­omy. But the im­pli­ca­tions of slow­ing Chi­nese growth for the rest of the world are al­ready vis­i­ble. Com­mod­ity ex­porters such as Aus­tralia have suf­fered, after profit­ing im­mensely from China s boom years when ex­pan­sion av­er­aged 10 per­cent, hit­ting 14.2 per­cent as re­cently as 2007.

There were lim­its to of­fi­cial non­cha­lance in Beijing, how­ever, as a se­ries of mea­sures dubbed "mini-stim­u­lus" by econ­o­mists were put in place from April, while in Novem­ber the cen­tral Peo­ple s Bank of China cut in­ter­est rates for the first time in more than two years to try to put a floor on the slow- down. Econ­o­mists are broadly ex­pect­ing fur­ther mon­e­tary pol­icy tin­ker­ing this year, but say the fo­cus will be on struc­tural re­forms over the temp­ta­tion of stim­u­lus.

"This would be sim­i­lar to eco­nomic pol­icy mak­ing in the late 1990s, which re­sulted in a decade-long re­form div­i­dend," Brian Jack­son, Bei­jing­based economist with IHS Eco­nomics, said in a re­search note. "Put to­gether, that points to weak­en­ing growth in 2015."

An of­fi­cial ex­pan­sion tar­get of "about" 7.5 per­cent was set for last year. The goal is tra­di­tion­ally pegged at a level that is eas­ily achieved, and is usu­ally ap­prox­i­mated to pro­vide wig­gle room for pos­i­tive spin just in case. It has not missed its mark since 1998 and the Asian eco­nomic cri­sis, but Premier Li Ke­qiang, who over­sees the econ­omy and is the coun­try s sec­ond most se­nior of­fi­cial, has re­peat­edly dis­missed con­cerns about un­der­shoot­ing the bench­mark, em­pha­sis­ing in­stead the im­por­tance of in­di­ca­tors such as job cre­ation -- a key fac­tor in sup­port­ing con­sumer con­fi­dence.

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