China’s economic growth slowed in the fourth quarter as gains in factory output and investment spending eased last month, sapping momentum as a credit clampdown adds pressure on the outlook for this year.
Gross domestic product rose 7.7 percent in the October-December period from a year earlier, the National Bureau of Statistics said today in Beijing, compared with 7.8 percent in the third quarter. Chinese stocks fell to a five-month low even as GDP exceeded the median estimate of analysts in a Bloomberg News survey.
Any deeper slowdown would test leaders’ willingness to implement the broadest policy shifts since the 1990s and tackle debt-fueled investment, after President Xi Jinping scrapped a goal of “relatively fast” growth in his first year in power. The world’s second-largest economy may expand at the weakest pace in almost a quarter century in 2014, a survey showed last month, as spending on infrastructure and factories moderates.
“Growth momentum is clearly weakening,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “The slowdown became increasingly clear as the quarter progressed.” Expansion will decelerate this year, he said.
The benchmark Shanghai Composite Index of stocks fell 0.7 percent, closing below 2,000 for the first time since July, while the yuan was little changed against the dollar. The MSCI Asia Pacific Index of stocks fell 0.3 percent as of 4:15 p.m. in Tokyo.
The economy grew 1.8 percent from the previous quarter, compared with a 2 percent median estimate of economists and 2.2 percent in the July-September period. GDP expanded 7.7 percent in 2013, the statistics bureau said, the same pace as in 2012. The economy is forecast to expand 7.4 percent this year, according to an analyst survey last month, the slowest pace since 1990.
China’s economy will be stable in 2014, Ma Jiantang, head of the statistics bureau, said at a press briefing today. The contribution to GDP from tertiary industries, which include services, exceeded secondary ones, mostly manufacturing, for the first time in 2013, Ma said.
The government’s policies and planning this year will focus on maintaining economic expansion in a “reasonable range,” Premier Li Keqiang told economists and business leaders last week, the official Xinhua News Agency reported on Jan. 17. He indicated in July his “bottom line” for expansion was 7 percent.
Industrial production rose 9.7 percent in December from a year earlier, today’s report showed. That compared with the 9.8 percent median forecast of analysts and a 10 percent gain in November. Retail sales rose 13.6 percent from a year earlier, matching a median estimate.
Fixed-asset investment excluding rural households increased 19.6 percent in the January-to-December period from a year earlier, the report showed. That compared with the 19.8 percent median estimate in a Bloomberg survey and a 20.6 percent pace in 2012.
The nation’s vehicle sales growth may slow this year to 8 percent to 10 percent from 14 percent in 2013, the China Association of Automobile Manufacturers said Jan. 9. Geely Automobile Holdings Ltd., the Chinese automaker whose parent owns Volvo Cars, sold fewer cars than it targeted in 2013, and forecast sales growth will slow to about 6 percent this year from 14 percent last year.
Xi and Li are trying to reduce the economy’s reliance on debt and mitigate risks of a financial crisis that could hinder the changes the ruling Communist Party pledged in November to implement. Data last week from the People’s Bank of China showed a record drop in second-half credit, following money-market cash crunches in June and December that underscored the difficulty of bringing credit under control.
The central bank last week warned banks to tame the pace of lending. It also pledged to “clean up” local-government financing vehicles after the National Audit Office reported that local authorities’ debts including contingent liabilities swelled to a record 17.9 trillion yuan as of June.
“The shadow banking risks have been exposed, so the key issue this year is whether we can control this problem,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “This year exports will be better, consumption is solid, but investment will further slow down.”
The banking regulator this month told lenders to publish data including off-balance-sheet assets and interbank liabilities as it steps up scrutiny of the shadow-finance industry amid increasing concerns that borrowers will default.
Industrial & Commercial Bank of China Ltd. last week rejected calls to bail out a troubled 3 billion-yuan trust product it distributed for China Credit Trust Co., a bank official with knowledge of the matter said. China Credit raised funds for a coal miner that subsequently collapsed.
China also faces demographic challenges. The working-age population fell by 2.44 million last year, the statistics bureau said, the second straight decline. The income gap was about the same as in 2012, with the bureau giving a Gini coefficient of 0.473, after 0.474 the previous year. That’s above the 0.4 level that the United Nations has said is a predictor of social unrest.
The Gini reading is “in line with the facts,” Ma said at today’s briefing in response to a question about whether the number is underestimated. The figure is “not low” and shows that China needs to do more to improve income distribution, he said. The data are based on a survey of 400,000 households across the country, he said.
Growth has been “fairly resilient,” Yao Wei, China economist at Societe Generale SA in Hong Kong, said in a Bloomberg Television interview. “It is more of the outlook that we worry about especially with the financial risk in the system. We have some trust products already in distress. If we get the first ever trust or bond default in China, what could be the implications for the economy?”
— With assistance by Xin Zhou, and Xiaoqing Pi