China’s economic growth slows

Even though it has propelled the global economy for much of the last decade, recent figures have shown China’s economy is slowing down to its lowest rate in 14 years. Official figures released today reveal that GDP growth for 2013 was 7.7 percent, down 0.01 percent on the previous year’s number.

Despite this slump, growth was higher than the government’s pessimistic target of 7.5 percent. China has sought to rebalance its economy in the last year, with an effort to step back from the heavy investment that has bolstered growth over the last decade. Instead, the regime has looked to encourage more of a domestic consumption-fuelled economy.

Despite this slump, growth was higher than the government’s pessimistic target of 7.5 percent

Many observers feel that this slow down in growth is not the disaster some think it might be, as it signifies a step towards a more realistic and sustainable level economy. HSBC’s Qu Hongbin, Co-Head of Asia Economics Research and Chief Economist for China, said in a note that China had ended 2013 on a “firm footing”.

“Fourth quarter GDP growth came in a tough higher than expected at 7.7 percent year-on-year, taking full year GDP growth to 7.7 percent, above the official target of 7.5 percent. Overall this sets the stage for Beijing to push forward its economic reforms in 2014. We expect the growth momentum to be maintained in the coming year thanks to the improving external outlook, ongoing reform measures designed to boost private investment and consumption, and the stable and supportive policy stance in the context of mild inflationary pressures.”

Reacting to the news, Mizuho Securities analyst Jianguang Shen said that consumption had remained “relatively resilient”. “Improving exports and resilient consumption were positive trends starting from Q4 2013, but investment growth began decelerating, mainly due to borrowing costs and increasing stress in the shadow-banking sector. We expect this divergent development…to continue in 2014.”

Announcing the news, China’s National Bureau of Statistics (NBS) chief Ma Jiantang said that it was a “critical period” for the country’s economy. “Generally speaking China’s economy showed good momentum of stable and moderate growth in 2013, which is a hard-earned achievement. However, we should keep in mind that the deep-rooted problems built up over time are yet to be solved in what is a critical period for China’s economy.”

In a note to investors, Shen agreed that the government faces a difficult balancing act in the coming months. “The government is faced with the difficult task of pushing for structural reforms whilst at the same time trying to avoid the risks associated with radical changes. We maintain our 2014 GDP growth forecast of 7.6 percent year-on-year, assuming that the government can fend off a full-blown financial crisis.”

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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