China annual growth hits 13-year low

January 18, 2013
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A man carrying out construction work in China/AFP
A man carrying out construction work in China/AFP
BEIJING, Jan 18 – The Chinese economy expanded 7.8 percent in 2012, the government said Friday — the worst performance in 13 years — in the face of weakness at home and in key overseas markets.

But gross domestic product (GDP) grew 7.9 percent in the final three months of the year, the National Bureau of Statistics (NBS) said, as it snapped seven straight quarters of slowing growth in a positive sign for the spluttering global recovery.

China’s GDP reached 51.9 trillion yuan ($8.28 trillion) in 2012, cementing its position as the world’s second-largest economy after the United States.

Annual growth slowed for a second straight year but the figures were just ahead of expectations, with economists surveyed by AFP having projected GDP growth of 7.7 percent in 2012 and 7.8 percent in the fourth quarter.

The official statistics come as optimism grows among analysts that China will pick up steam in 2013 after two years of relative weakness. The AFP survey showed expectations of an acceleration to 8.0 percent growth this year.

“The international economic environment remains complicated this year and… there are still unbalanced conflicts in the Chinese economy,” NBS spokesman Ma Jiantang told reporters.

Still, Ma added: “We expect China’s economy to continue to grow in a stable manner in 2013.”

China’s growth has slowed amid weakness in the global economy, particularly the key export markets of the United States and Europe, and as the government took steps to cool a once red hot property market.

The annual growth figure was the lowest since 1999, when it stood at 7.6 percent, according to official statistics.

But IHS Global Insight senior economist Ren Xianfang said the worst was probably over for China’s economy and that it had avoided a “hard landing”, although challenges remained as it entered a “new normal” of slower growth.

“The rebound by itself looks quite shaky,” she wrote in a report after the data. “The trajectory of recovery is flat, mirroring the shallow downturn it’s rebounding from.”

Growth had slowed for seven straight quarters through September, when the economy expanded 7.4 percent, the worst since early 2009. Annual GDP grew 9.3 percent in 2011 and 10.4 percent in 2010.

Successfully managing the economy is a key concern for China’s leaders who derive much of their claims to legitimacy from the country’s reform-led economic rise, which has lifted hundreds of millions of people out of poverty over the past three decades.

The government is due to formally conclude a once-in-a-decade power handover in March with Xi Jinping, already named Communist Party chief, becoming president and Li Keqiang taking over as premier in charge of day-to-day administration.

The country’s economy is widely seen as having matured to the point where the growth model of the past, including public spending for big ticket infrastructure projects, must be modified.

The World Bank said last month that China’s economy is expected to expand 8.4 percent this year, but added that longer-term GDP growth is expected to moderate as China’s leaders move away from a growth model based on investment and exports.

Zhang Zhiwei, China economist for Nomura International in Hong Kong, told AFP: “The data showed that the recovery is on track, but in the meantime inflation is picking up.

“So monetary policy will likely be tightened this year, with no chances of cuts in banks’ reserve requirements or interest rates. As a result, GDP growth may slow down in the second half of this year.”

The government is targeting average growth of seven percent during the five years through 2015.

The statistics bureau also released other key indicators Friday.

Industrial production grew 10.0 percent in 2012 and 10.3 percent in December year-on-year. Retail sales, China’s main gauge of consumer spending, increased 14.3 percent in 2012 and 15.2 percent in December.

Also, fixed-asset investment, a key measure of government spending on infrastructure, expanded 20.6 percent to 36.5 trillion yuan in 2012 — accounting for just over 70 percent of GDP.

In a statement the NBS said China’s overall economic performance was “getting stabilised”.

“In the next phase we should… focus on changing the economic growth mode as the main theme and improving the quality and efficiency of economic growth at the core,” it said.

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