China's economy grew at its slowest pace in 25 years in 2015, official data showed on Tuesday (Jan 19), confirming a slowdown in the world’s number two economy.
Gross domestic product (GDP) expanded 6.9 per cent last year, in line with market expectations but well below 2014’s 7.3 per cent growth. Beijing has set a growth target of “about 7 per cent” for 2015.
For the October-December quarter, the Chinese economy grew 6.8 per cent from a year earlier, down from 6.9 per cent in the third quarter and marked the economy’s weakest pace of expansion since early 2009.
Asian shares wavered following the data releases, with Japan's Nikkei 225 index trading 0.7 per cent lower after turning positive briefly. China's Shanghai Composite index added 0.2 per cent while the blue-chip CSI300 index lingered near the flatline. In Hong Kong, the benchmark Hang Seng index trimmed gains to 0.1 per cent.
On the other hand, the Australian dollar fell to $0.6842 against the greenback, from a session high of $0.6893.
“The full-year GDP is in line with our forecasts,” ING’s chief economist Tim Condon said in a telephone interview. “Even if the fourth quarter number is slightly below our forecasts, that is not enough to warrant a shock to the markets.”
Tony Nash, chief economist at Complete Intelligence, agreed: “China has structural issues and the GDP figures deviated from the plan, but growth at 6.9 per cent is not something to lose sleep about.”
A renewed selloff in the local stock markets and the falling Chinese yuan have stoked concerns about the health of China’s economy as of late. Tuesday’s data may have confirmed that these fears have been blown out of proportion, according to Louis Kuijs, head of Asia economics at Oxford Economics.
"I think that at least the biggest fears about the real economy, fears that came to the surface during the stock market rout... were overblown."
MONTHLY DATA DELUGE
Meanwhile, investors are also reading Tuesday's industrial production, fixed asset investment (FAI) and retail sales numbers to gauge the health of China's economy.
FAI, a key growth driver, climbed 10 per cent in the whole of 2015 from the previous year, just below forecasts for a 10.2 per cent rise. Industrial output rose 5.9 per cent on-year, slightly lower than the consensus print for 6.0 per cent.
Retail sales for December rose 11.1 per cent from the year ago period, missing forecasts for 11.3 per cent, but analysts Channel NewsAsia spoke to remained upbeat about the country’s consumer demand.
“I think China’s retail sales data is great,” Mr Nash said in a telephone interview. “Given the size of China’s retail market, I think the transition to a consumer-led economy is still intact.”
“Consumer demand seems to have remained resilient. Although retail sales growth edged down, sales are still growing faster than during most of last year,” Julian Evans-Pritchard, China Economist at Capital Economics said.
As such, “growth does appear to have been broadly stable last quarter and the December data, although mixed, don’t suggest that China is now entering a deeper economic crisis,” Mr Evans-Pritchard added.
MORE EASING TO COME
To counter slowing growth, Beijing has unleashed a slew of easing measures, including interest rate and reserve requirement ratio cuts from the central bank.
However, with the all-important property sector still sluggish at best, analysts see further aggressive action from policymakers to bolster the mainland's slipping growth rate.
Data on Tuesday showed growth of investment in China's property sector continued to decline, dropping to 1 per cent in December, marking the slowest growth in nearly seven years.
This is compared with an annual rise of 1.3 per cent in the first 11 months of 2015 and 10.5 per cent through 2014.
“2015 has been a difficult year with the housing downturn and export slump. But monetary data from last week suggested that at least from a policy point of view, there was a considerable amount of stimulus coming through,” ING's Mr Condon said. “Authorities have plenty of room to unleash stimulus so worries about a significant slowdown in 2016 are unwarranted."
On Monday, Chinese President Xi Jinping said the country’s long-term economic fundamentals remain sound, despite downward growth pressure and recent volatility in the country’s financial markets, according to state media Xinhua News Agency.
Mr Xi, speaking at a symposium attended by ministers and provincial officials, added that China’s economy has entered a “new normal” – defined as a new stage of slower but more resilient growth.