China's economic growth slows in 2011

China's economic growth slows in 2011

FMCG SUPPLIER NEWS

Fin24 - Jan 18th, 09:58

Beijing - China said on Tuesday its economy expanded by 9.2% last year, slowing from 2010 as global turbulence and efforts to tame high inflation put the brakes on growth. 

But still-healthy annual growth suggested that China's economy would avoid a much-feared hard landing despite slumping demand from key export markets in the United States and Europe, analysts said.

The figures, down from 10.4% growth in 2010, also meant China's central bank was less likely to ease credit in the short term to spur the world's second-largest economy.

Beijing had set a growth target of about 8.0% for 2011.

"This indicates our economy is still good and quite stable, and a soft landing for the economy is more possible. Therefore, the government is likely to postpone the next policy easing move," said Li Huiyong, economist at Shenyin Wanguo Securities in Shanghai.

China's Gross domestic product (GDP) grew 8.9% in the fourth quarter, the National Bureau of Statistics said, slower than in the third quarter but still exceeding analyst expectations.

"It's slowing, even though it's not particularly aggressive. The economy seems to be surprisingly resilient so far," said Stephen Green, regional head of research for Greater China at Standard Chartered Bank in Hong Kong.

Output from the country's millions of factories and workshops rose 13.9% for all of 2011, a slower pace than in 2010 as manufacturers faced reduced demand from key export markets.

Urban fixed asset investment - a measure of government spending on infrastructure - rose at a slightly slower pace of 23.8% last year as Beijing retreated from stimulus measures.

And retail sales, a key indicator of consumer spending, rose 17.1% in 2011, slightly slower than in 2010. The government wants domestic consumption to play a greater role in economic growth.

Statistics bureau chief Ma Jiantang warned China could face a tough year ahead in the light of Europe's sovereign debt crisis.

"We must say that 2012 will be a year of complexity and challenges," he told a news conference.

"Given the turbulence in international financial markets and more serious protectionism in various forms, we're going to face serious challenges."

Most economists are predicting GDP growth of 8.0% to 8.5% for 2012. China will unveil its economic growth target at the annual session of the legislature in March.

"The slowdown that's been under way for some time continues to be the trend, but it's a slowdown to a rate that's still pretty healthy... and a rate which the Chinese government seems comfortable with," said Andy Rothman, China macro-strategist for brokerage CLSA.

Year-on-year growth in China has slowed for four straight quarters as Beijing - anxious about soaring costs - had restricted lending and hiked interest rates, while US and European demand for Chinese-made products has also weakened.

Nonetheless the fourth-quarter GDP growth beat a forecast of 8.6% by analysts polled by Dow Jones Newswires.

The news buoyed China's stock market, with the benchmark Shanghai index up 0.93% to 2 226.67 points at midday.

In a bid to boost growth and counter the slowdown in export demand, authorities in December cut the amount of money banks must hold in reserve for the first time in three years.

China's trade surplus shrank in 2011 to $155.14bn as export growth slowed sharply, reflecting the economic turmoil in Europe and the US, according to previously released data.

Some analysts had expected the government to move again to loosen credit as early as this month, but stronger-than-expected growth in the fourth quarter could give policymakers breathing room, analysts said.