China’s economy narrowly missed expectations for growth to hit 14-year lows in 2013, though some economists say a cooldown will be inevitable this year as officials and investors hunker down for difficult reforms.
The chance that the world’s second-largest economy may decelerate in coming months was underscored on Monday by data that showed growth in investment and factory output flagged in the final months of last year.
Waning momentum capped China’s annual economic growth at a six-month low of 7.7 per cent in the October-December quarter, a slowdown some analysts say may deepen this year as China endures the short-term pain of revamping its growth model for the long-term good.
Full-year growth in 2013 was 7.7 per cent, steady from 2012 and just slightly above market expectations for a 7.6 per cent expansion, which would have been the slowest since 1999. “It’s like a Chinese medicine,” said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.
“If you don’t take it, you may have problems in future. But if you take it now, you cannot expect to regain your youth tomorrow.”
After 30 years of sizzling double-digit economic growth that lifted many millions of Chinese out of poverty but also devastated the environment, China wants to change tack by embracing sustainable and higher-quality development instead. That means reducing government intervention to allow financial markets to have a bigger say in allocating resources, and promoting domestic consumption at the expense of investment and exports. Monday’s data from the National Bureau of Statistics showed China’s 56.9 trillion yuan economy is still very much dependent on investment for growth.
Capital formation accounted for 54 per cent of China’s economic growth last year, exceeding the 50 per cent share taken up by consumption. Net exports, detracted 4.4 per cent.