China’s economic growth edged down to its lowest level in 25 years to 6.8 per cent in the final quarter of 2015 as trade and consumer spending weakened.
Restructuring and upgrading is in an uphill stage. Comprehensively deepening reform is a daunting taskWang Bao’an
Growth has fallen steadily over the past five years as the ruling Communist Party tries to steer away from a worn-out model based on investment and trade toward self-sustaining growth driven by domestic consumption and services.
But the unexpectedly sharp decline over the past two years prompted fears of a politically dangerous spike in job losses.
Full-year growth declined to 6.9 per cent, government data showed yesterday. That was the lowest since sanctions imposed on Beijing following its crackdown on the Tiananmen Square pro-democracy movement caused growth to plummet to 3.8 per cent in 1990.
The October-December growth figure was the lowest quarterly expansion since the aftermath of the global financial crisis, when growth slumped to 6.1 per cent in the first quarter of 2009. Growth in the July-September quarter of 2009 was 6.9 per cent.
Growth in investment in factories, housing, a key economic driver, weakened to 12 per cent in 2015, down 2.9 percentage points from the previous year. Retail sales growth cooled to 10.6 per cent from 2014’s 12 per cent.
“The international situation remains complex,” said Wang Bao’an, commissioner of the National Bureau of Statistics. “Restructuring and upgrading is in an uphill stage. Comprehensively deepening reform is a daunting task.”
Growth was in line with private sector forecasts and the ruling Communist Party’s official target of about 7 per cent for the year. Beijing responded to ebbing growth by cutting interest rates six times since November 2014 and launched measures to help exporters and other industries. But economists note China still relies on state-led construction spending and other investment.
December exports shrank 1.4 per cent from a year earlier, well below the ruling party’s target of 6 per cent growth in total trade. For the full year, exports were down 7.6 per cent, a blow to industries that employ millions of workers.
Forecasters expect economic growth to decline further this year, with the International Monetary Fund targeting a 6.3 per cent expansion.
The Chinese slowdown and a plunge in Shanghai stock prices have prompted concern about a further loss of support from an economy once seen as an engine of global growth.
That has depressed international financial markets even as the United States and Europe show signs of improvement.
“Official data does not point to a hard landing in the fourth quarter of 2015, but it provides little reason to stop worrying about China’s drag on the global economy, either,” said economist Bill Adams, of PNC Financial Services Group, in a report.
China’s Shanghai Composite jumped 3.2 per cent following the announcement and other Asian markets also rose. Investors were relieved that more pessimistic forecasts about fourth quarter growth were wrong and also expect Beijing to continue rolling out stimulus measures to prevent a hard landing.
The Chinese slowdown, along with rising geopolitical tensions, led the International Monetary Fund (IMF) to cut its growth forecasts for the next two years.