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ATAHK learns from the government authority that China's economy recorded its slowest annual expansion in a quarter of a century in 2015, growing 6.9 percent compared to the year before although largely in line with the government’s target of around 7 percent, data from the National Bureau of Statistics showed yesterday.
However, fourth-quarter growth, at 6.8 percent, was worse than expected.
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Gross domestic product was 67.67 trillion yuan (US$10.3 trillion) last year, with the service sector accounting for 50.5 percent, the first time it had exceeded 50 percent.
The economy still “ran within a reasonable range” last year, with its structure further optimized, upgrading accelerated, new growth drivers strengthened and people’s lives improved, bureau chief Wang Baoan told a press conference.
In terms of quarterly expansion, the fourth-quarter growth trailed the pace of 6.9 percent in the third quarter and 7 percent in both the second and first quarters of last year. The slowdown continued as the economy rose 7.3 percent in 2014.
“China, although slowing in growth, remained a global economic star performer,” said Ajay Dayal, investment director at Legg Mason. “The country has been a beacon for world economy and has increasing weight in the global economic basket.”
Wang said the expansion was hard-earned against the background of huge complexity and challenges in both global and domestic markets.
“We have managed to overcome various difficulties, including a slow global economic recovery and faster reforms in the domestic market,” he told reporters. “The rate is reasonable and fulfills our target for the year.”
He dismissed concerns over government debts, noting that they accounted for less than 40 percent of the country’s GDP, well below the internationally accepted alert line of 60 percent.
Thanks to substantial foreign exchange reserves, a depreciating yuan will not affect the economy much either, he said, adding that the depreciation will not be sustained as the growth outlook remains positive.
Viewed against an international backdrop, growth of 6.9 percent was “not a low rate” and outshone other global economies, Wang said, defending it as a hard-won achievement. Though slowing, China still contributed to more than 25 percent of global economic growth, he said.
The growth was led by the service sector, which gained 8.3 percent to 34.16 trillion yuan. The manufacturing sector added 6 percent to 27.43 trillion yuan.
Agriculture rose 3.9 percent to 6.08 trillion yuan.
Zhu Haibin, chief economist for China at JP Morgan, said the data indicated a remarkable divergence between the manufacturing and service sectors, which could be a good sign for a more balanced industrial structure.
“China’s efforts on economic restructuring seemed to pay off, with the service sector accounting for more than half of the economic output for the first time,” Zhu said.
“Also worthy of mentioning, the contribution of consumption to the growth reached 66.4 percent, the highest since 2011.”
Eric Tang, of Citibank (China) Co Ltd, said services outperformed manufacturing notably last year.
“But it put this year’s growth under pressure because much of the gain in the service sector last year came from the booming equity market in the first half of last year, and the market outlook is full of uncertainties this year, while investors are unlikely to be as confident as a year earlier,” he said.
Other activity data also suggested growth moderation in nearly all aspects last year.
Industrial production rose 6.1 percent, weakening from the acceleration of 8.3 percent in 2014. Fixed-asset investment added 10 percent, also less than the rise of 15.7 percent a year earlier, with investment in the property sector edging up just 1 percent.
Retail sales growth moderated to 10.7 percent from 12 percent
“China’s growth momentum remained soft,” said Liu Ligang, chief economist at Australia & New Zealand Banking Group Co Ltd.
“The country’s growth is undergoing a debt-deflation led downward business cycle, and the traditional fiscal and monetary policy will only have limited impact on the economy by mitigating the pace of the slowdown,” he said.
Liu said China’s growth may slow to 6.4 percent this year and hit the bottom of 6 percent in 2017. A gradual rebound in growth could start in 2018, together with an upward property market cycle, he said.
Tang said the economy may expand 6.3 percent this year, and to achieve it, the central bank will likely reduce the benchmark interest rates twice, along with five cuts in the reverse requirement ratio to allow banks more capital at hand.
China still has room to ease monetary policies as inflation growth moderated to a six-year low of 1.4 percent in 2015, much lower than the government target of controlling it below 3 percent, according to other analysts.
To bolster growth, the People’s Bank of China lowered the benchmark interest rates five times last year, along with five decreases of reserve requirement ratio.
Wang Tao, an economist at UBS, said China’s economy may see a flat growth this year but with many emerging industries active and lively.
“The year may see divergent performance in different industries,” Wang said, who forecast an economic growth rate of 6.2 percent for this year, and 5.8 percent for 2017.
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