CHINA’S ECONOMY expanded at its slowest pace in 2½ years as export demand flagged and government efforts to stop runaway property prices and ease inflation took their toll.
Gross domestic product in the world’s second-largest economy rose 8.9 per cent in the fourth quarter from a year earlier, the statistics bureau said in Beijing yesterday. This is the first time the Chinese economy has grown by less than 9 per cent since mid-2009.
However, the slowdown was less than expected and fuelled a growing consensus that the Chinese economy was still on track for a “soft landing”.
Beijing increased interest rates and tightened investment restrictions last year to prevent overheating and head off inflation.
Full-year economic growth slowed to 9.2 per cent from 10.4 per cent in 2010, the report showed.
Attention will now turn to whether Europe slides deeper into recession and whether the property market correction is messy or well managed.
To some extent, the fourth-quarter data barely counts as a slowdown, and December data was upbeat, suggesting the economy ended the quarter strongly.
Industrial production and retail sales growth were each well above consensus forecasts.
However, there are warning signs in the data. Investment in real estate comprised almost a quarter of total investment, which goes even higher once related industries such as steel and cement are factored in.
“China’s Q4 data suggests the economy is stronger than previously thought,” Mark Williams and Wang Qinwei of Capital Economics said in a research note.
“[The] data gives little reason for policymakers to be considering significant, imminent policy easing. However, policymaking should be forward-looking, and slower growth probably lies ahead. The impact of the rolling euro zone crisis is hard to measure, but problems in real estate are already stacking up.”
UBS economist Wang Tao said China achieved a “soft landing” last year. However, she believed the export and property slowdown would be more pronounced this year than in 2011 because, while US demand was improving and core euro zone economies appeared to be resilient, risks remained.
“We see export growth slowing sharply, we see much weaker but not a collapse of property construction, we think policy will be supportive of growth and do not see property downturn and local debt leading to systemic risk in the banking system in the near future,” she said.
While the Chinese government projects that export growth will slow to a still respectable 10 per cent in 2012, Ms Wang was less optimistic.
Brian Jackson of Royal Bank of Canada noted that monthly data in December showed a pick-up in year-on-year growth in industrial production and retail sales. He said the data showed “that China’s economy is still slowing, but also that this is continuing to happen at a gradual pace”.
