SHANGHAI: China’s economic growth slowed to 7.4 percent in 2014, the weakest expansion in nearly a quarter century, and is forecast to slip further over the next two years, adding to headwinds for the global economy, keeping pressure on Beijing to take aggressive steps to avoid a sharper downturn.
European and Asian shares in fact rose on relief, the Shanghai Composite index gained 1.85 per cent, Japan’s Nikkei 225 index saw its biggest one day gain in a month and European markets rallied. But for investors worried about growth in China and the world this year, the data poses two questions:
Will the soft numbers and expectations of further weakness force the central bank to pump hundreds of billions of dollars into banks system wide to prop up growth? And if so, what does that mean for Beijing’s attempts to reform its economy?
The world’s second largest economy grew 7.4 per cent in 2014, barely missing its official 7.5 per cent target but still the slowest since 1990, when it was hit by sanctions in the wake of the Tiananmen Square crackdown. It expanded 7.7 per cent in 2013.
Fourth quarter growth held steady at 7.3 per cent from a year earlier, slightly better than expectations. Few had expected China to meet its 7.5 per cent full year target, but the performance was better than some had feared after a rough few months raised concerns the economy may be heading for a hard landing.
The country’s periods of miraculous break neck growth is over, but let’s get over it, the end of the high speed growth era does not spell an end for China’s economy.