BEIJING: Chinese economic growth plunged to its lowest speed and expanded only 7.4pc in 2014. It is expected to lose more momentum this year, keeping pressure on policymakers to head off a sharper downturn.
Its slowest rate since 1990 and below its official target of 7.5pc – the first miss since 1999. It expanded 7.7pc in 2013.But analysts said a slightly better-than-expected performance in the fourth quarter could temper Beijing’s policy response, if the government and central bank believe the strains on the world’s second-largest economy are starting to ease.
Few had expected China to meet its 7.5pc full-year target, but the performance was better than feared at one point when credit collapsed, bad loans spiked and key activity indicators fell to multi-year lows.
A series of modest support measures from the government over the year helped stave off worries of a more dramatic slowdown, without fueling a sharp rise in China’s mountain of debt which the country’s leaders are trying to avoid.
“This is the best possible miss you could have from a messaging standpoint,” said Andrew Polk, economist at the Conference Board in Beijing.
“The government is saying, ‘we’re not married to this specific target, we missed it and we’re okay.’ That seems to me a quite positive development.”
However, Mr Polk said the figure was difficult to square with more negative signs emerging from other parts of the economy.
China’s property market – a major driver of demand across a range of domestic industries – has proven stubbornly unresponsive to policy support, and lending data from the banking system shows enduring weakness despite policymakers’ repeated and varied attempts to boost investment.
The weak property market and high funding costs remain key risks facing the economy in 2015.
Policymakers also are concerned about the potential onset of a deflationary cycle, aggravated by plummeting energy prices, industrial overcapacity and sluggish demand.
At the same time, there may be a looming crisis among debt-sodden local governments which are facing strains from sliding property sales, on which they rely for much of their revenue.
In another worrying sign, power output growth in China, used by some as a proxy for economic performance, posted its slowest growth rate since 1998 at 3.2pc.
December data posted numerous upside surprises after a weak November. Factory output rose 7.9pc versus expectations for 7.4pc, while retail sales rose 11.9pc, above predictions of 11.7pc.
However, growth in fixed asset investment, a key growth driver, eased to 15.7 percent in the whole of 2014 from the previous year, near a 13-year low. Economists had expected a 15.8pc rise.
Underscoring the drag on the economy from the housing sector, investment growth in real estate slowed to a five-year low and new construction slumped, even as sales improved at the end of the year.
“We think (property) sales may improve somewhat but for me, what is important is construction. I don’t see housing starts picking up till next year … given that there’s a lot of inventory,” said UBS economist Wang Tao in Beijing.
A further slowdown in China could hinder the chances of a revival in global growth in 2015, which right now is being led by what the World Bank calls the “single engine” of strong hiring and activity in the US.
With China’s growth expected to cool further to 7pc this year or less, more support measures are still expected, though economists are divided over how much more will be needed.
