China's GDP growth slows to 7.4% in 2014, the lowest in 24 years

BEIJING (AFP, Bloomberg, Reuters) - China's GDP growth slowed to 7.4 per cent in 2014, official data showed Tuesday (Jan 20), the lowest since 1990, as authorities in the world's second-largest economy talk of a "new normal" of slowing expansion.

The 2014 figure announced by the National Bureau of Statistics (NBS) was below growth of 7.7 per cent in 2013, but exceeded the median forecast of 7.3 per cent in an AFP survey of 15 economists.

China's Q4 economic growth also beat economists' estimates, helping the full-year expansion remain close to the government's target of "about" 7.5 per cent.

GDP expanded 7.3 per cent year-on-year in the fourth quarter of last year, the NBS said, matching the 7.3 per cent result in the third quarter and beating the 7.2 per cent median forecast in the survey.

Still, the 2014 result is the first miss since 1998 during the Asian economic crisis.

"China's economy has achieved stable progress with improved quality under the new normal in 2014," the NBS said in a statement. "However we should also be aware that the domestic and international situations are still complicated and economic development is facing difficulties and challenges.

The full-year result was the worst since the 3.8 per cent recorded in 1990 and comes as one of the pillars of the global economy was hit last year by troubles including manufacturing and trade weakness as well as declining prices for real estate, which has sent a shock through the country's key property sector.

The NBS also said that industrial production rose 7.9 per cent in December from a year earlier, compared with the 7.4 per cent median estimate of analysts and November's originally reported 7.2 per cent. Retail sales, a key indicator of consumer spending, increased 11.9 per cent from a year earlier, compared with the 11.7 per cent seen by economists.

Policymakers showed increasing signs of discomfort in the second half of the year as economic indicators began to consistently surprise on the down side, culminating in an unexpected cut to guidance lending rates by the central bank in November.

The People's Bank of China (PBOC) has also tinkered with the money supply while refraining from a full cut to reserve requirement ratios (RRR) at banks. A reduction in RRR could flood the market with some 2.4 trillion yuan (S$520 billion) in fresh cash when accounting for the multiplying effect of fresh loans, but some worry the money could simply be rerouted into sustaining the very industrial overcapacity and property bubbles that regulators have been fighting to suppress.

However, the targeted easing measures have yet to show much effect in bringing down financing costs, and thus many now see further interest rate cuts and/or lower reserve requirement ratios (RRR) as unavoidable if conditions don't improve soon.

Beijing has ruled out massive stimulus as China is still struggling to digest a mountain of debt left over from the 4 trillion yuan stimulus package in 2009.