China 2015 growth slows to weakest for 25 years

 China's GDP grew at its slowest in a quarter of a century last year, creating pressure for more stimulus policies to ensure a soft landing for the economy that is a crucial driver of global growth.

The 6.9 percent figure was the slowest in the People's Republic since the 3.8 percent of 1990, a year after the bloody Tiananmen Square crackdown rocked the country and isolated it internationally.

But while the outcome is much smaller than the double-digit rates seen before the financial crisis, it is seen as the "new normal" and within Beijing's target range as it looks to recalibrate the economy to a more sustainable model.

The data -- in line with a median forecasts in an AFP survey -- was welcomed by strong gains on markets in China and across Asia and Europe as dealers bet on a new round of monetary easing measures, including more interest rate cuts.

Global markets have been hammered in recent weeks by worries over China, the world's number two economy, wiping trillions off valuations.

"Expectations for further cuts in interest rates and banks' reserve ratios increased after the economic figures," Zhang Gang, an analyst at Central China Securities, told AFP.

China's leaders -- who targeted growth of "about seven percent" -- are looking to transform the economy away from the investment and exports of the past to one more oriented towards domestic consumer demand.

The services sector accounted for 50.5 percent of gross domestic product in 2015, the first time it was more than half the economy, the National Bureau of Statistics said as it released the figures.


   - 'Crucial period' -
  

The structural transformation was still underway, it added, calling it "a crucial period during which challenges need to be overcome and problems need to be resolved".

Last year's growth was well below the 7.3 percent of 2014, and the AFP survey projected it would fall to 6.7 percent this year.

NBS chief Wang Baoan told reporters that this year would be "more or less the same as in 2015 and China's economic growth will still face a complicated and volatile international situation", but said he was confident growth will "remain stable".

The Communist party is widely expected to lower the growth target this year, and President Xi Jinping has said expansion of 6.5 percent will be sufficient for China's needs.

"It's a very difficult balancing act for the Beijing authorities," Standard Bank China economist Jeremy Stevens told AFP.

"What we expect is growth to slow, and them to limp ahead with the reforms they can, at the time that they can.

"And when the macro-economic data is too weak, they probably pause or flip-flop on some of those policy choices. "The economy is in the process of stabilisation, but it hasn't stabilised yet," Liao Qun, chief economist at Citic Bank International in Hong Kong, told AFP.

Questions have repeatedly been raised about the accuracy of official Chinese economic statistics, which critics say can be subject to political manipulation, and even Premier Li Keqiang has reportedly expressed doubts about the data.

  
- 'Strong headwinds' -

 
Unexpected moves in the yuan exchange rate -- after a surprise devaluation in August -- have also disturbed investors in recent weeks, with fears the real picture is worse than portrayed and authorities may not be able implement reforms to make the economy more market-driven.

Julian Evans-Pritchard, China economist for Capital Economics, said in a note: "The continued stability of the official GDP figures will do little to assuage concerns over their credibility."

While official figures should not be taken at face value, he said, the data "don't suggest that China is now entering a deeper economic crisis" and his group expects China's results "to gradually turn more upbeat over the next few months".

But some economists forecast a rockier year.

Zhao Yang of Nomura reiterated the bank's 5.8 percent forecast for 2016 due to "strong headwinds" and overcapacity in manufacturing, along with an excess supply of property.

China's industrial production, which measures output at factories, workshops and mines, rose 5.9 percent year-on-year in December, the NBS said, and retail sales, a key indicator of consumer spending, were up 11.1 percent -- both below the forecasts in a survey by Bloomberg News.

Fixed asset investment, a measure of spending on infrastructure, expanded 10.0 percent in the year -- its weakest since 2000.

Shanghai swung in and out of positive territory and was sitting 1.4 percent down at lunch.

The losses were characteristic of the start to a year that has seen world markets slump, wiping trillions off valuations.

"We'll continue to see a tug-of-war between nervous sentiment and technical indicators showing that falls have gone too far," Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo, said by phone.

"At the root of the selling we've seen this year has been the imbalance of oil supply and demand, so until the oil price moves calm down, the stock market will struggle."

The IMF cut its growth outlook for the global economy to 3.4 percent from 3.6 percent previously, saying there were substantial risks in major emerging market economies.

The stronger US dollar, collapsed oil prices and political turmoil could all wreak further havoc and warned of danger if China does not manage its slowdown well and reforms its economy.

Emerging market currencies slipped as investors shifted out of high-yielding, riskier, assets. The Australian dollar fell 0.5 percent against the greenback, while the Indonesian rupiah shed 0.4 percent and oil-dependent Malaysian ringgit shed 0.3 percent.

New Zealand's dollar lost 0.5 percent as the country's inflation came in at the weakest level in 16 years, fuelling speculation authorities could cut interest rates from already record lows. (AFP)