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China GDP slows down to 14-yr low but crosses official target

Last Updated: Monday, January 20, 2014 - 20:38

Beijing: China's economy grew by 7.7 percent in 2013, the lowest in 14 years, amid painful reform process undertaken by the world's second largest economy to spur growth amid efforts to avoid defaults on huge debt.

China's GDP expanded 7.7 percent from a year ago, the slowest pace of growth since 1999, official figures here said on Monday.

The GDP reached a sizable 56.88 trillion yuan (USD 9.31 trillion), the National Bureau of Statistics (NBS) said. The economy's fourth-quarter growth also stood at 7.7 percent.

The figure, however, brought a sigh of relief for the Chinese government as this is the first economic data of the government that assumed power in March last year under the leadership of Xi Jinping in a once-in-a-decade political transition in the communist nation.

It is "a good report card" presented to China's leaders who took office in March last year, state-run Xinhua news agency quoted experts as saying.

There were concerns earlier that the government could be under political and economic pressure if the 2013 GDP goes below the official target of 7.5 percent.

The figure also matches the growth rate of 2012 under the previous regime of Hu Jintao.

Releasing the new data, NBS director Ma Jiantang said "China's economic performance stabilised in 2013". He cited encouraging GDP and job data as well as a subdued inflation.

Figures showed China created over 10 million new jobs in 2013 and inflation stood at 2.6 percent, state-run Xinhua news agency reported.

The 7.7 percent in the final quarter of 2013 marked a moderate slowdown from 7.8 percent in the third quarter.

The Chinese government defined the "upper and lower limits" of the reasonable range of economic performance in 2013.

With a GDP growth rate of 7. 5 percent, the "lower limit" is intended to ensure steady expansion and employment, and with the consumer price index at around 3.5 percent, the "upper limit" is meant to prevent inflation.

According to estimates, the amount of local government debt last year was around 15 trillion yuan (about USD 2.4 trillion) that include 9.5 trillion yuan in loans and three trillion yuan in trust funds, said Jiang Chao, chief analyst of the?debt?market with Haitong Securities.

Playing down the concerns of debt default, Premier Li Keqiang ordered an official audit of the local governments loans from the state banks.

There are fears that much of these loans drawn for unviable projects by local authorities faced default.

But officials at the same time shrugged off the concerns as China maintained reasonable trade momentum in 2013 with its external trade overtaking US for the first time, crossing over USD four trillion mark.

Zhang Liqun, an analyst with the Development Research Centre of the Central Cabinet said downside pressure still existed and cited deep-rooted problems, including mounting local government debt and industrial overcapacity.

"The country should further promote reforms to release dividends and generate internal driving force of the economy.

"As the world situation improves, China's economic growth may pick up in the third and fourth quarter of this year," said Zhang.

Aided by continuing trade surplus, China's foreign exchange reserves last year climbed to USD 3.82 trillion, the world's highest.

China also managed to get a healthy USD 117.59 billion Foreign Direct Investment (FDI) last year?rebounding from a fall in 2012, which officials say marks faith of the investors in the health of its economy.

China also launched major economic reforms last year, including setting up of Shanghai Free Trade Zone (FTZ) much on the lines of the successful Shenzhen FTZ launched three decades ago.

A note from a research team with the Bank of America Merrill Lynch led by chief China economist Lu Ting said "it is very likely for GDP growth to rebound again in the first two quarters of 2014.

"The chance for it to rise to around 7.8 percent to 7.9 percent is quite high in the first and second quarter of this year".

"Retail sales growth will accelerate in the first few months this year thanks to a lower comparison base as the country's frugality campaign started in the beginning of 2013," the note said.

Today's GDP data headed a string of other positive economic figures.

Retail sales growth slowed slightly to 13.6 percent in December from November's 13.7 percent, in line with market expectations.

Fixed asset investment growth rose 19.6 percent in the whole of 2013, following the 19.9 percent expansion in the January-November period.

"Growth in fixed asset investment is at decade lows as the Chinese government tries to steer the economy away from investment-led growth," said a research note from Moody's Analytics.

"We are likely to see a continuation of slower but more sustainable investment growth in 2014 as policy makers focus on re-balancing the economy to domestic consumption," said the research note.

On the manufacturing side, the industrial output in China grew 9.7 percent in 2013, marking a deceleration from the 10-percent growth seen in 2012.

Today's data also showed industrial output expanded 9.7 percent year-on-year in December, a drop of 0.3 percentage point compared to growth in November.

Industrial output is a major indicator for economic activities in 41 industries.

Since 2011, the data only covers companies each with at least an annual business revenue of 20 million yuan (USD 3.27 million).

For the whole of 2013, major sectors all saw a year-on-year rise, with the auto industry becoming the top gainer by surging 14.9 percent, after record sales of 21.98 million vehicles.

Chemical products manufacturing gained 12.1 percent, while non-metal minerals production grew 11.5 percent, the data showed.

Computers, telecom and electronic products increased 11.3 percent, ferrous metals went up 9.9 percent and cement grew 9.6 percent.

Textiles grew 8.7 percent, while crude steel expanded 7.5 percent, data showed.

NBS also said China's business climate index, a major gauge of the country's macroeconomic outlook, dropped in the fourth quarter.

The index was 119.5 points for the fourth quarter, down two points from the previous quarter.

The figure continued to stay above 100 points, indicating that Chinese enterprises were still operating in an upbeat climate, NBS said.

First Published: Monday, January 20, 2014 - 20:38
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