China’s economic growth at seven-year low

January 22nd, 2009 - 7:01 pm ICT by IANS  

Beijing, Jan 22 (Xinhua) China’s economy registered the slowest growth in seven years in 2008, expanding nine percent year-on-year as the global financial crisis continued to affect the country’s economy, official data showed Thursday.China’s gross domestic product (GDP) reached 30.067 trillion yuan ($4.4216 trillion) in 2008, Ma Jiantang, director of the National Bureau of Statistics (NBS), told a press conference.

The nine-percent growth rate was the lowest since 2001, when an annual groth rate of 8.3 percent was recorded, and it was the first time that China’s GDP growth fell into the single-digit range since 2003.

The year-on-year growth rate for the fourth quarter slid to 6.8 percent from 9 percent in the third quarter and 9.9 percent for the first three quarters, according to Ma.

Exports, which accounted for about one-third of GDP, fell 2.8 percent year-on-year to $111.16 billion in December. Exports declined 2.2 percent in November from a year earlier.

Industrial output rose 12.9 percent year-on-year in 2008, down 5.6 percentage points from the previous year, Ma said.

Government economist Wang Xiaoguang said the 6.8-percent growth rate in the fourth quarter was not a sign of a “hard landing,” just a necessary “adjustment” from previous rapid expansion.

“This round of downward adjustment won’t bottom out in just a year or several quarters but might last two or three years, which is a normal situation,” he said.

A report Thursday from London-based Standard Chartered Bank called the 6.8-percent growth in the fourth quarter “respectable” but said the data overall presented “a batch of mixed signals.”

“We probably saw zero real growth in the fourth quarter compared with the third quarter, and it could have been marginally negative,” it said.

The weakening economy has already had an impact on several Chinese industrial giants. Angang Steel (Ansteel), one of the country’s top three steel producers, said Wednesday that its net profit fell 55 percent last year as steel prices plunged.

However, officials and analysts said some positive signs surfaced in December, which they said indicated China could recover before other countries.

December figures of money supply, consumption, and industrial output showed some “positive changes” but whether they represented a trend was unclear, Ma said.

Outstanding local currency loans for December expanded by 771.8 billion yuan, up from 723.3 billion an year earlier, according to official data.

Retail sales growth in December accelerated by 0.8 percentage points from November to 17.4 percent. Industrial output also accelerated in December, up 0.3 percentage points from the annual rate of November.

Wang Qing, Morgan Stanley Asia’s chief economist for China, said GDP growth would hit a trough in the first or second quarter. China will perform better than most economies affected by the global crisis and gradually improve this year, he said.

Zhang also predicted that the economy will touch bottom and start recovering later this year, depending on the performance in January and February.

The NBS director said that overall, the economy maintained good momentum with fast growth, stable prices, optimized structures and improved living standards.

China’s performance was better than the average growth of 3.7 percent for the world economy last year, 1.4 percent for developed countries and 6.6 percent for developing and emerging economies, he said, citing estimates of the International Monetary Fund.

“With a 9-percent rate, China actually contributed more than 20 percent of global economic growth in 2008,” said Ma.

He added that energy efficiency across the economy had improved and energy intensity, the amount of energy it takes to produce a unit of GDP, fell 4.21 percent year-on-year in 2008, a larger decrease than the 3.66 percent recorded in 2007.

A slowing economy poses a concern for the authorities, which they have acknowledged several times in recent weeks, as rising unemployment could threaten social stability.

The urban unemployment rate rose to 4.2 percent at the end of 2008, up 0.2 percentage point year-on-year.

Rising unemloyment could also undermine consumer spending, which the government is counting on to offset weak external demand.

The government has maintained a target of eight percent annual economic growth since 2005.

China announced a 4 trillion-yuan economic stimulus package in November aimed at boosting domestic demand.

Ma said he believed domestic consumption would maintain rapid growth as long as personal incomes continue to increase and social security benefits improve.

Urban disposable incomes rose a by 8.4 percent last year, while those of rural Chinese went up 8 percent, he said.

Analysts have warned that consumption could be affected if low rates of inflation deteriorate into outright deflation and factory closures result in more jobless migrant workers.

Ma said that about five percent of 130 million migrant workers had returned to their homes in rural areas since late 2008 as their employers had closed down or suspended production.

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