China’s economy grew at its weakest pace in a quarter of a century last year, raising hopes Beijing would cushion the slowdown with more stimulus policies, which in turn prompted a rally on the country’s rollercoaster share markets.
Growth for 2015 as a whole hit 6.9 percent after the fourth quarter slowed to 6.8 percent, capping a tumultuous year that witnessed a huge outflow of capital, a slide in the currency and a summer stocks crash.
Concerns about Beijing’s grip on economic policy have shot to the top of global investors’ risk list for 2016 after a renewed plunge in its stock markets and the yuan stoked worries that the economy may be rapidly deteriorating.
China’s slowdown, along with the slump in commodity prices, prompted the International Monetary Fund to cut its global growth forecasts again on Tuesday, and it said it expected the world’s second-largest economy to see growth of only 6.3 percent in 2016.
Data from China’s statistics bureau showed that industrial output for December missed expectations with a rise of just 5.9 percent, while electric power and steel output fell for the first time in decades last year, and coal production dropped for a second year in row, illustrating how a slowing economy and shift to consumer-led growth is hurting industry.
December retail sales growth was also weaker than expected at 11.1 percent last month, disappointing those counting on the consumer to be the new engine of growth.
“While headline growth looks fine, the breakdown of the figures points to overall weakness in the economy,” said Zhou Hao, senior emerging markets economist for Asia at Commerzbank Singapore.
“All in all, we believe that China will experience a ‘bumpy landing’ in the coming year,” he said.
There was relief in the markets, however, that growth at least matched forecasts, and a growing expectation that more monetary easing measures were imminent, possibly before Lunar New Year holidays in early February.
Angus Nicholson, market analyst at IG in Melbourne, said in a note that further cuts in interest rates and the reserves that banks have to set aside were already looking “a foregone conclusion” before the data release, and now it was a question of timing.