China's growth slips to 24-year low but analysts say not cause for concern

CHINA might have missed its economic growth target for the first time since 1999 but experts say that with an upbeat labour market and healthy wage growth, the 7.4 per cent growth last year should not be a cause for concern.

While official economic data released on Tuesday showed China's growth domestic product (GDP) slumping to a 24-year low and coming in slightly under the target of "about" 7.5 per cent, authorities describe this slowing expansion as the "new normal" for the world's second-largest economy.

The 2014 figure announced by the National Bureau of Statistics 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.

"Some will undoubtedly view today's GDP figures as a failure of China's leaders to meet their annual growth target. We think this misses the point. Last year's target of about 7.5 per cent was always intended to be flexible," said Capital Economics' Julian Evans-Pritchard.

"We suspect policymakers allowed growth to slow to the lower-end of their target range in order to encourage economic rebalancing to take place at a faster pace. The fact that policymakers didn't roll out aggressive stimulus just in order to hit the 7.5  per cent mark is a positive development," he added.

Mr Olivier Blanchard, the International Monetary Fund's (IMF) chief economist, added at a separate news conference on Tuesday that the slowdown reflects a welcomed decision by the Chinese government to re-balance its economy.

Economic data also showed that while slowing investment has continued to put downward pressure on growth, this has been offset by a pick-up in consumption and services on the back of falling oil prices and rising wages. Retail sales growth similarly strengthened last month. 

But experts say that with Premier Li Keqiang urging local officials to act quickly in response to significant downward pressure on the economy at a State Council meeting on Monday, policymakers might shift their priorities in favour of supporting growth this year.

"Nonetheless, we still expect growth to slow slightly to around 7 per cent this year. Concerns over building credit risks will likely continue to prevent policymakers from using monetary policy too aggressively in order to shore up growth," Mr Evans-Pritchard said.

China's central bank cut interest rates for the first time in two years last November as the government accelerated the approval of infrastructure projects to boost an economy mired in a property slump and industrial overcapacity. 

esthert@sph.com.sg