China’s economy slowed last December, capping the weakest quarter of growth since the 2009 global recession, as the Communist leadership struggles to manage a transition to consumer-led expansion.
Industrial production, retail sales and fixed-asset investment all slowed at the end of the year, while GDP rose 6.8 percent in the fourth quarter from a year earlier. Full-year growth of 6.9 percent, the least since 1990, was in line with the government’s target of about 7 percent.
Downward pressure on industry threatens to spread to consumption and services—an unwelcome prospect for policy-makers who must weigh the need for further monetary easing with the risk it would spur more weakness in the yuan and additional capital outflows. Another dilemma: cutting excess capacity that’s weighing on old industrial drivers without triggering a deeper slump. “Growth is still soft but it’s not collapsing,” said Shane Oliver,
head of investment strategy and chief economist at AMP Capital Investors Ltd. in Sydney.
“Policy stimulus measures are helping but more is needed to help the economy as it transitions from a reliance on manufacturing and investment to services and consumption.”
Industrial production posted one of the weakest gains in the past quarter century, increasing 5.9 percent in December from a year earlier. That compared with a 6-percent median estimate of analysts and November’s 6.2 percent. Retail sales increased 11.1-percent from a year earlier, compared with the 11.3 percent projected by economists. Fixed- asset investment excluding rural areas expanded 10 percent last year, the slowest pace since 2000.
“This may complicate the fragile balance between carrying out reforms and maintaining growth,” said Daili Wang, a Singapore-based economist at Roubini Global Economics Llc. “Fourth-quarter growth was a mere 1.6 percent quarter-on-quarter, with annualized growth at 6.4 percent, already lower than the 6.5-percent growth target,” citing his own calculations based on Tuesday’s data.
China’s top leadership has signaled in recent months that it may allow some additional slowness as they tackle delicate tasks, such as reducing excess capacity, but nothing that could threaten President Xi Jinping’s goal of at least 6.5-percent growth through 2020.