BEIJING — China’s GDP grew at its slowest pace in a quarter of a century last year, creating pressure for more stimulus policies to ensure a soft landing for an economy that is a crucial driver of global growth.
The 6.9% figure was the lowest for the People’s Republic since the 3.8% growth of 1990, a year after the bloody Tiananmen Square crackdown rocked the country and isolated it internationally. But while the outcome is much smaller than the double-digit rates seen before the financial crisis, it is seen as the “new normal” and within Beijing’s target range as it looks to recalibrate the economy to a more sustainable model.
The data — in line with median forecasts in an AFP survey — was welcomed by strong gains on markets in China and across Asia and Europe as dealers bet on a new round of monetary easing measures, including more interest rate cuts.
Global markets have been hammered in recent weeks by worries over China, the world’s No. 2 economy, wiping trillions off valuations.
“Expectations for further cuts in interest rates and banks’ reserve ratios increased after the economic figures,” Zhang Gang, an analyst at Central China Securities, told AFP.
China’s leaders — who targeted growth of “about 7%” — are looking to transform the economy away from the investment and exports of the past to one more oriented towards domestic consumer demand. The services sector accounted for 50.5% of GDP in 2015, the first time it was more than half the economy, the National Bureau of Statistics said as it released the figures.
“A Crucial Period”
The structural transformation was still underway, it added, calling it “a crucial period during which challenges need to be overcome and problems need to be resolved.”
Last year’s growth was well below the 7.3% of 2014, and the AFP survey projected it would fall to 6.7% this year. NBS chief Wang Baoan told reporters that this year would be “more or less the same as in 2015 and China’s economic growth will still face a complicated and volatile international situation,” but said he was confident growth will “remain stable.”
The Communist party is widely expected to lower the growth target this year, and President Xi Jinping has said expansion of 6.5% will be sufficient for China’s needs.
“It’s a very difficult balancing act for the Beijing authorities,” Standard Bank China economist Jeremy Stevens told AFP.
“What we expect is growth to slow, and them to limp ahead with the reforms they can, at the time that they can,” Liao Qun, chief economist at Citic Bank International in Hong Kong, told AFP. “When the macro-economic data is too weak, they probably pause or flip-flop on some of those policy choices. The economy is in the process of stabilization, but it hasn’t stabilized yet.”
Questions have repeatedly been raised about the accuracy of official Chinese economic statistics, which critics say can be subject to political manipulation, and even Premier Li Keqiang has reportedly expressed doubts about the data.
Unexpected moves in the yuan exchange rate — after a surprise devaluation in August — have also disturbed investors in recent weeks, with fears that the real picture is worse than portrayed and authorities may not be able to implement reforms to make the economy more market-driven.
Julian Evans-Pritchard, China economist for Capital Economics, wrote that, “The continued stability of the official GDP figures will do little to assuage concerns over their credibility.”
While official figures should not be taken at face value, he also wrote that the data “don’t suggest that China is now entering a deeper economic crisis” and his group expects China’s results “to gradually turn more upbeat over the next few months.”
But some economists forecast a rockier year.
Zhao Yang of Nomura reiterated the bank’s 5.8% forecast for 2016 due to “strong headwinds” and overcapacity in manufacturing, along with an excess supply of property.
China’s industrial production, which measures output at factories, workshops and mines, rose 5.9% year-on-year in December, the NBS said, and retail sales, a key indicator of consumer spending, were up 11.1% — both below the forecasts in a survey by Bloomberg News.
Fixed asset investment, a measure of spending on infrastructure, expanded 10.0% in the year — its weakest since 2000.
By Benjamin Carlson
Copyright Agence France-Presse, 2016