CHINA SLOWDOWN
Chinese pedestrians walk past an ad for Swiss watches Tuesday in Beijing. Data released Tuesday showed that China’s economy grew at its slowest rate in a quarter century, but economists and global markets generally welcomed the news that the deceleration wasn’t worse. China’s annual growth of 6.9 percent was just short of government forecasts. Kevin Frayer, Getty Images
beijing» The slowdown of China’s once-sizzling economy has fueled anxiety over its impact on the rest of the world. Yet when Beijing reported Tuesday that its economy grew last year at the slowest pace in a quarter-century, the reaction seemed to be relief it wasn’t worse.
Economists welcomed details in the report suggesting that the world’s second-biggest economy is making some progress in a difficult and complex transition — away from a reliance on manufacturing and investment in real estate and factories and toward dependence on services and consumer spending.
Stocks rose Tuesday in Asia and Europe. The Dow Jones industrial average closed up 27.94 points.
“Things are OK,” said Fotios Raptis, senior economist at TD Economics. “There’s not an outright collapse going on in China.”
Beijing reported that economic growth fell in 2015 for a fifth straight year — to 6.9 percent, down from 7.3 percent in 2014 and the slowest rate since 1990.
For the October-December quarter, growth inched down to 6.8 percent, the weakest quarterly expansion in six years.
The deceleration is at least partially deliberate as the ruling Communist Party aims to manage the economy’s transition to a structure that will almost certainly deliver slower growth.
Tuesday’s report contained signs of progress. Service businesses accounted for a record 50.5 percent of China’s economic activity last year, the first time its share has exceeded 50 percent.
Charles Collyns, chief economist at the Institute of International Finance, sees considerable potential for more growth in China’s service sector. In more developed economies, services account for perhaps 75 percent of economic activity. China’s services have been held back by regulations and policies that favor inefficient state-owned service companies in such businesses as telecommunications and finance.
Services grew 8.3 percent last year, outpacing the traditional drivers of economic growth — manufacturing and construction — which together grew 6 percent.
Overall growth was in line with private-sector forecasts and the ruling Communist Party’s official target of about 7 percent for the year.
“Official data do not point to a hard landing in the fourth quarter of 2015, but they provide little reason to stop worrying about China’s drag on the global economy, either,” said economist Bill Adams of PNC Financial Services Group in a report.
Investors were relieved that more pessimistic forecasts about fourth-quarter growth were wrong and expect Beijing to continue rolling out stimulus measures to prevent a hard landing.
Forecasters expect China’s economic growth to decline further this year, with the International Monetary Fund targeting a 6.3 percent expansion. Tuesday’s “numbers are somewhat reassuring to markets, suggesting that some of their worst fears are not materializing,” Collyns said.