BEIJING, China (2nd UPDATE) – China’s economy last year registered flat growth of 7.7%, maintaining its slowest expansion in more than a decade as the government warned Monday of “deep-rooted problems” including a mountain of local authority debt.
Gross domestic product (GDP) expansion for the October-December quarter also came in at 7.7%, the National Bureau of Statistics (NBS) said, slowing from 7.8% in the previous three months.
The 2013 GDP figure was the same as that for 2012 – which was the worst rate of growth since 1999 – and matched the median forecast in a survey of 14 economists by Agence France-Presse. It exceeded the government’s growth target for the year, which was declared as 7.5%.
Growth for the fourth quarter was better than the Agence France-Presse survey’s median forecast of 7.6%.
“Generally speaking China’s economy showed good momentum of stable and moderate growth in 2013, which is (a) hard-earned achievement,” NBS chief Ma Jiantang told reporters, as the agency also reported positive data for industrial output, retail sales and fixed asset investment.
“However, we should keep in mind that the deep-rooted problems built up over time are yet to be solved in what is a critical period for China’s economy,” Ma said.
Since the 1980s, China has shaken off the lethargy of the Communist command economy with market reforms that brought it years of blistering growth, making its GDP second only to the US and establishing it as the world’s biggest trading power in goods.
But the country is widely expected to face slower expansion in the years ahead.
Its leaders under President Xi Jinping say they are committed to transforming China’s growth model to one where consumers and other private actors play the leading role, rather than huge and often wasteful state investment.
For 2014, the median forecast in the Agence France-Presse survey of economists was for growth to slow to 7.5%.
“Judging from the data, our outlook for 2014 remains that China’s economy will continue slowing down in the first half,” Wendy Chen, Shanghai-based analyst for Nomura International, told Agence France-Presse.
Within the past decade Chinese growth was regularly in double digits, but it has been on a slowing trend and the 2013 result shows GDP growth in single figures for three consecutive years for the first time since 2002.
Ma of the NBS said China faces problems including dealing with burgeoning local government debt.
“The foundation of economic growth remains to be consolidated, the internal driving forces of economic expansion need to be further fostered, the risk of local government debt should be prevented and greater efforts are to be made to weed out out-dated production capacity,” he said.
Besides shifting the growth emphasis, China’s leaders are also concerned about the country’s financial system including “shadow banking” and government debt, particularly at the regional level.
China late last month announced the results of a long-awaited debt audit, revealing that liabilities carried by local governments had ballooned to 17.9 trillion yuan ($2.95 trillion) as of the end of June, up 67% from the end of 2010.
Local authorities have long used debt to fuel growth in their regions, often by pursuing projects that are not economically viable or sustainable.
While few see the problem as a systemic threat, the debt issue is considered to be a serious potential drag on China’s economy unless steps are taken to rein it in.
Analysts also say that shadow banking – non-transparent, less regulated credit – can stoke asset bubbles and threaten stability.
The term refers to lending sometimes issued by legitimate banks and financial institutions, as well as private deals between individuals or companies, that have arisen as a way of getting around strict banking rules.
Separately, the NBS said industrial output, which measures production at factories, workshops and mines, rose 9.7% in December year-on-year, while also expanding 9.7% over 2013.
Retail sales, a key indicator of consumer spending, gained 13.6% in December from the same month the year before and rose 13.1% in 2013, it said.
And fixed asset investment, a measure of government spending on infrastructure, expanded 19.6% in 2013, the NBS added.
“The economic trend in December and the fourth quarter was in general slower than that of the third quarter, with industrial production scaling back in December,” Wang Tao, Hong Kong-based economist for UBS Securities, told Agence France-Presse.
“The main reason was a decrease in infrastructure investment in the past few months, due to a stronger intention by the central government to control credit issuance and local government debt,” she added. – Rappler.com