China slices 2014 GDP growth figure

A worker checking wind-turbine blades in a Jiangsu factory. Many Asian markets fell after China cut its 2014 growth figure to 7.3 per cent.
A worker checking wind-turbine blades in a Jiangsu factory. Many Asian markets fell after China cut its 2014 growth figure to 7.3 per cent.PHOTO: AGENCE FRANCE-PRESSE

Investors worry whether Beijing can hit 2015 target of about 7%

China's economy grew more slowly last year than previously announced, raising questions over whether it can hit this year's target of about 7 per cent.

The official figure for 2014 was revised lower by 0.1 percentage point to 7.3 per cent because of slower expansion in the services industry.

The disclosure sent many Asian share markets down yesterday despite assurances made by G-20 finance ministers during the weekend to dispel fears over China's slowdown.

Investors are concerned that Chinese bourses will continue to fuel volatility while last Friday's losses on Wall Street on the back of new jobs data fuelled growing expectations that rates in the United States could rise sooner rather than later.

Emerging market currencies came under renewed pressure after Friday's jobs numbers, with the Malaysian ringgit and Indonesian rupiah hitting fresh 17-year lows against the US dollar. .

The Singaporean dollar also fell to a fresh six-year low at 1.4276 against the greenback, but strengthened to 3.0323 against the ringgit from 3.0018 on Friday.

The Singdollar also strengthened to 10,025.53 against the rupiah from 9,994.61 on Friday. The Thai baht traded near its six-year low against the US dollar.

The revision came following comments by Chinese Finance Minister Lou Jiwei at the G-20 meeting that expansion will remain around 7 per cent this year, and that the "new economic normal" of lower growth may last four to five years.

China will go through "labour pains" in the next five years as it digests excess industrial capacity and inventories, and aims to complete main structural reforms by 2020, Mr Lou added. Beijing is counting on services to help soften the economy's transition from reliance on debt-fuelled property and infrastructure investment to consumption.

Some economists have revised down their forecasts for China's 2015 growth.

Mr Jeff Ng, Asia economist, Standard Chartered Bank, told The Straits Times that he expects GDP to ease to 6.9 per cent this year.

"China has been the biggest contributor to global growth in 2014 despite slower growth, more than the US, by around 50 per cent. China's moderating growth serves as a reminder that we should not expect strong upside in exports to the country going forward," Mr Ng said.

"This year, growth has been supported by modest expansions in the domestic and external sectors. The trend should continue. It is likely that the cloudy outlook from external headwinds (will) continue to limit Singapore's GDP and productivity growth."

For others, China's revision is not a surprise. Mr Mark Matthews, head of Research Asia, Bank Julius Baer, said the market should be watching for the fifth plenary session of the Communist Party to be held next month, which may indicate its next five-year plan, and how the country will respond to slowing growth.

Mr David Carbon of DBS Group Research noted: "What has slowed in China are fixed asset investment and industrial production. But that was the plan, remember? Now that that's happening, many seem to think the sky is falling. It's not." But he acknowledged that China "does have a debt problem, and how it deals with bad debt will have a direct impact on the quantity and quality of its longer-term growth".

A version of this article appeared in the print edition of The Straits Times on September 08, 2015, with the headline 'China slices 2014 GDP growth figure'. Print Edition | Subscribe