China growth in ‘13 slowest in 14 years
Jan 20 2014 , Beijing
The chance that the world’s second-largest eco-nomy may decelerate in coming months was underscored on Monday by data that showed growth in investment and factory output flagged in the final months of last year.
Waning momentum capped China’s annual economic growth at a six-month low of 7.7 per cent in the October-December quarter, a slowdown some analysts say may deepen this year as China endures the short-term pain of revamping its growth model for the long-term good.
Full-year growth in 2013 was 7.7 per cent, steady from 2012 and just slightly above market expectations for a 7.6 per cent expansion, which would have been the slowest since 1999.
“It’s like a Chinese medicine,” said Lu Zhengwei, chief economist at Industrial Bank in Shanghai. “If you don’t take it, you may have problems in future. But if you take it now, you cannot expect to regain your youth tomorrow.”
After 30 years of sizzling double-digit economic growth that lifted millions of Chinese out of poverty but also devastated the environment, China wants to change tack by embracing sustainable and higher-quality development instead.
That means reducing government intervention to allow financial markets to have a bigger say in allocating resources, and promoting domestic consumption at the expense of investment and exports.
Monday’s data from the National Bureau of Statistics showed China’s 56.9 trillion yuan ($9.4 trillion) economy is still very much dependent on investment for growth. Capital formation accounted for 54 per cent of China’s economic growth last year, exceeding the 50 per cent share taken up by consumption. Net exports, on the other hand, detracted 4.4 per cent from overall growth.
“I don’t see any evidence of a rebalancing last year,” said Tim Condon, an economist at ING in Singapore.
Yet there are signs Beijing wants to rein in investment. For the whole of 2013, China’s fixed-asset investment climbed 19.6 per cent, the smallest increase in at least 10 years and a tick below forecasts for a 19.8 per cent rise.
Ambitious investment by local Chinese governments that have racked up some $3 trillion worth of debt has been at the forefront of China’s investment drive in recent years, a trend that must be checked, said Ma Jiantang, head of China’s statistics bureau. “In 2014, I believe reforms will continue to be a key driving forces for economic growth,” Ma said on Monday.
To be sure, the gentle falloff in growth is welcomed by most experts as a must-have in China as it transits to better-quality development. If growth continues to ease in a controlled manner, China’s government can impose some difficult changes without worrying about a spike in job losses that will stir social discord.
It will also give Beijing the latitude to keep monetary policy stable this year, as most economists expect it will likely do, even as regulators continue to crack down on riskier lending, the fallout from which is unnerving some stock market investors. “On the whole, the Chinese economy is performing well through its adjustment phase,” said Brian Jackson, chief China economist at IHS Global Insight. Concerns that China may sacrifice too much growth in its bid to enact change are also unfounded, Jackson said.
Though an average of the 2014 growth targets already issued by 22 of China’s 31 local governments shows growth has been revised downwards by nearly a percentage point by large provinces that are China’s commercial centres have mostly kept their growth targets stable, he said.