China’s 2012 growth eases to 13-year low

China’s economy rebounded in the fourth quarter of 2012 but also recorded its first annual growth rate of less than 8 percent since 1999.

China’s gross domestic product grew 7.8 percent year on year to reach 51.93 trillion yuan (8.28 trillion U.S. dollars) last year due to both external and domestic factors, data from the National Bureau of Statistics (NBS) showed on Friday.

The growth rate decelerated from 9.3 percent in 2011 and 10.4 percent in 2010. It was the slowest rate recorded since 1999, when the GDP expanded 7.6 percent year on year. ( The economy’s fourth-quarter growth quickened to 7.9 percent, ending a seven-straight-quarter slowdown, NBS head Ma Jiantang said at a press conference. It was up from 7.4 percent in the third quarter, 7.6 percent in the second and 8.1 percent in the first.

“From a medium- and long-term view, we should be aware that China has entered a new growth stage,” said Zhang Liqun, an analyst with the Development Research Center of the State Council.

ENCOURAGING DATA

Both annual and quarterly GDP growth figures outstripped forecasts because of strong December trade data, as well as improved consumption and investment near the end of last year.

“Government stimulus measures introduced since early 2012 have produced results. They have helped reverse the slowdown and stabilize growth,” said Wang Jun, an economist at the China Center for International Economic Exchanges.

Last May, the government shifted its top priority from taming inflation to stabilizing growth. It has moderately eased its grip on lending, approved massive construction projects and stepped up tax reductions to buoy the economy.

GDP figures headed a string of other encouraging economic data on Friday. Retail sales, a key indicator of consumer spending, rose 15.2 percent from a year earlier in December, up from 14.9 percent in November.

The growth of industrial production accelerated to 10.3 percent year on year in December from November’s 10.1-percent pace. Fixed-asset investment, a measure of government spending on infrastructure, also increased 1.53 percent from November to December.

China’s exports, a key growth driver, also trumped market expectations to grow 14.1 percent year on year in December, up from November’s 2.9 percent, customs data showed last week.

The economy’s structure and environmental impact improved, with domestic consumption accounting for more growth and the consumption of clean energy exceeding that of traditional energy, Ma told reporters.

Final consumption contributed to 51.8 percent of the GDP growth in 2012, while the contribution of net goods and services exports was negative 2.2 percent, Ma said.

UNCERTAINTIES REMAIN

Many economists are expecting the government to set the full-year GDP growth target for 2013 at 7.5 percent, unchanged from that of last year, as the current rebound is still volatile.

“I think the economy’s growth has stabilized, but whether the rebound will continue remains uncertain,” said Zhang.

China’s major economic risks in 2013 still lie in uncertainties in its external markets and domestic property sector, Zhang said, citing risks in the U.S. and eurozone economies and speculation in the real estate market.

NBS’s Friday data showed a warming property market despite tight government controls. Fifty-four out of a statistical pool of 70 major Chinese cities, up from 53 in November, record higher new home prices in December. It marked a third consecutive month of such increases.

Skyrocketing home costs have led to public dissatisfaction, prompting authorities to introduce measures such as third-home purchase bans to cool the sector, which once served as a key driver of the economy’s growth.

Meanwhile, a possible surge in inflation fueled by global easing will force authorities to rely more on fiscal policies, rather than monetary easing, to shore up growth, Zhang said.

To this end, China’s growth is likely to accelerate in the first half of the year but slow mildly in the second half, with growth for 2013 close to that of 2012, said Alaistair Chan, an economist at Moody’s Analystics.

China’s central bank cut interest rates twice in mid-2012, as well as cut the reserve requirement ratio for banks three times since December 2011.

Despite greater inflationary pressure, Ma said China will be able to keep the overall prices stable in 2013, as last year’s grain harvest and industrial production overcapacity will help keep price hikes in check.

Ma said the recovery trend will likely continue in 2013, saying that the transfer of rural labor, urbanization and industrialization, which were fundamental drivers for China’s rapid growth in the past, have not changed.

END OF HIGH-GROWTH ERA

Growth is expected to moderate in the world’s second-largest economy in the years to come, as new Communist Party of China (CPC) leaders sworn in last November have shown more concern regarding growth quality and domestic reforms.

“A reference to improving the quality and efficiency of growth suggests [the leadership’s] increased emphasis on reducing pollution and wasteful investment,” Chan said.

A statement released after a central economic work conference held last December said “enhancing the quality and efficiency of economic growth” will be a “central task” this year.

Economic growth rates between 7 and 8 percent will facilitate the transformation of China’s economic development, Ma said.

Ma acknowledged that less labor, limited resources and greater demand for a better environment will make the rapid growth of years past unattainable and unaffordable.

Meanwhile, advantages in the demographic dividend, which has supported the economy’s rapid growth, are also vanishing. NBS data on Friday showed that the number of working-age people decreased by 3.45 million to 937.27 million in 2012, the first time such a dramatic drop has been recorded.

Compared with driving economic growth, China faces more urgent tasks in pushing reforms, especially those related to income distribution and the fiscal and financial sectors, Wang said.

NBS data showed that the Gini coefficient, a widely used measure of economic inequality, has stayed at a relatively high level of 0.47 to 0.49 in the past decade, indicating that the government needs to focus more on distributing wealth equitably.

China has vowed to double the country’s 2010 GDP and per capita income for both urban and rural residents by 2020, according to a report released after last year’s 18th CPC National Congress.

Xinhua