China’s economic growth slowest in 25 years

Source: PTI 

  China’s economy grew 6.9% in 2015, the slowest pace in 25 years, slipping below the 7%-mark and sparking concerns both at home and abroad over the continued slowdown in the world’s second largest economy. The growth rate, released by China’s the National Bureau of Statistics (NBS) on Tuesday, moderated to 6.8% for the fourth quarter, the lowest quarterly rate since the global financial crisis in 2009, and 6.9% for 2015. Chinese Premier Li Keqiang last year had said that the Chinese government targeted an annual economic growth of around 7% for 2015. As per the new data, China’s Gross Domestic Product (GDP) reached 67.67 trillion yuan (about $10.3 trillion) in 2015, with the service sector accounting for 50.5%, the first time the ratio exceeded 50% overtaking the manufacturing, the NBS said. Tuesday’s figures put a grade on a tumultuous year that saw the slowdown’s impact spill over to global markets and batter the government’s reputation for competent economic management. Analysts said if the economy slips below 6.8% the government may have to opt for a stimulus package which it is trying to avoid, though investments in infrastructure, which is termed as mini stimulus measure has gone up substantially. The slowdown has already destabilised China’s stock market last year which also had negative effect in the world markets. China had worst stock market crashes last year which wiped out about $3.2 trillion of capital, prompting government initiate investigation. Since then the market experienced severe volatility. Over 20 million small investors who lost heavily in the fluctuations deserted the market. Since last year the government has also been vocal about the slowdown saying that the Chinese economy has entered a “new normal” in view of the transition from a state-led investment and manufacturing growth to one more dependent on services and consumption. Tuesday’s data said China’s service sector contributed 50.5% to the country’s GDP in 2015, up from 48.1% in 2014 as manufacturing which fired China’s development in the last three decades has taken back seat. The ratio, which has continued growing over the last two decades, exceeded 50% for the first time, indicating China's economic restructuring has made progress, NBS said. Factory contribution to the GDP was 10% lower than services as the Chinese government tried to shift from investment powered growth to innovation led expansion. Playing down the concerns over the slowdown, the NBS said China’s economy still “ran within a reasonable range” in 2015, with its structure further optimised, upgrading accelerated, new growth drivers strengthened and people’s lives improved. However, the country faces a daunting task in deepening reforms on all fronts and needs to step up supply-side structural reforms, NBS chief Wang Baoan said. Major economic indicators softened in 2015, with industrial output growth slowing to 6.1% year on year from 8.3% in 2014. Urban fixed-asset investment continued to cool, expanding 10% year on year, compared with 15.7 % in 2014. Retail sales rose 10.7%, down from 12% registered in 2014. Also the annual growth of China’s property investment continued to cool to one percent in 2015, a sharp decrease from the 10.5% growth in 2014. The yearly reading was down from 1.3% growth for the first 11 months and two-percent growth for the Jan-Oct period, according to NBS data. Investment in residential housing, which accounts for about two-thirds of the total property investment, edged up 0.4 %from a year earlier, compared with a growth of 0.7 % in the first 11 months. New housing construction dropped 14% year on year in the year, with new residential housing construction declining 14.6%. Slowing property investment, which used to be a main driver of the Chinese economy, has been seen as a drag on overall economic growth.  

January 19, 2016 | 04:00pm IST