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China economic growth at 14-year low China economic growth at 14-year low
(about 1 hour later)
China's economy, the world's second-largest, grew at its slowest pace in 14 years in 2013, official figures show.China's economy, the world's second-largest, grew at its slowest pace in 14 years in 2013, official figures show.
Its gross domestic product (GDP) expanded 7.7% from a year ago, the slowest pace of growth since 1999. Its gross domestic product (GDP) grew at an annual rate of 7.7% in the October-to-December period, down from 7.8% in the previous quarter.
The growth rate was higher than the government's target of 7.5% and the same as in 2012. But it was still higher than the government's target rate of 7.5%.
The data highlights the challenge policymakers face in sustaining China's high growth rate as they look to rebalance the economy.The data highlights the challenge policymakers face in sustaining China's high growth rate as they look to rebalance the economy.
Further slowdown? China has said it wants to move away from an investment-led growth model to one driven by domestic consumption.
Many analysts expect the country's growth rate to slow as it takes steps to move away from an investment-led growth model to one driven by domestic consumption. 'Encouraging'
China's growth rate slowed to an annual rate of 7.7% in the October-to-December quarter, down from 7.8% in the previous three months. "It's very much within the range of what the government was aiming for," David Wilder, head of the Beijing bureau of Market News International, a financial information provider, told the BBC.
"The figure showed China's economy had touched the bottom in the third quarter of 2013 and then stabilised in the end of last year," said Li Huiyong, an economist with Shenyin & Wanguo Securities in Shanghai. "The fact is that the Chinese economy mustn't and can't grow at the double digit rates we're used to seeing. And in some regards slower growth is actually encouraging because it suggests that it's moving to a more sustainable pace."
"We expect the trend will continue in 2014 as the policymakers [are] determined to push forward the reforms to maintain stable economic growth. Li Huiyong, an economist with Shenyin & Wanguo Securities in Shanghai, said: "We maintain our 2014 GDP growth forecast of 7.5% as we still need to be on guard for the risks from debt problems in the economy."
"We maintain our 2014 GDP growth forecast of 7.5% as we still need to be on guard for the risks from debt problems in the economy." But some observers are sceptical about the latest figures.
Euan Stirling, investment director of UK equities at Standard Life Investments, told the BBC: "There's a broad belief that the growth rate is below that of the 7.7% published this morning - it's probably nearer 4% or 5%."
Underlying economic activity levels, such as industrial production and power demand figures, suggest lower growth rates, he said.
Debt concernsDebt concerns
A government-led investment boom has been a main factor driving China's growth in recent years.A government-led investment boom has been a main factor driving China's growth in recent years.
Chinese banks, especially the big four state-owned lenders, lent record sums of money in the years after the global financial crisis in an attempt to sustain the country's high growth rate.Chinese banks, especially the big four state-owned lenders, lent record sums of money in the years after the global financial crisis in an attempt to sustain the country's high growth rate.
However, there have been concerns that part of that money has gone towards unproductive investments and that banks may not be able to recover those loans.However, there have been concerns that part of that money has gone towards unproductive investments and that banks may not be able to recover those loans.
The fear among many is that a jump in bad loans - ones that cannot be repaid - would not only hurt the country's banking sector, but also have a big impact on its overall growth. If they cannot, it could have a significant impact on growth, some analysts believe.
Shadow banking
There are also concerns over the growth of shadow banking - lending by non-banking companies - in the country.There are also concerns over the growth of shadow banking - lending by non-banking companies - in the country.
Critics have warned that shadow banking makes credit less transparent and poses a major risk to China's economic growth.Critics have warned that shadow banking makes credit less transparent and poses a major risk to China's economic growth.
Earlier this month, various media reports indicated that China had drafted rules calling for greater supervision and monitoring of the shadow banks. China is thought to be drafting rules calling for greater supervision and monitoring of the shadow banks.
Banks have been told to publish data on 12 key indicators, including off-balance-sheet assets, to enhance their transparency.Banks have been told to publish data on 12 key indicators, including off-balance-sheet assets, to enhance their transparency.
Shen Jianguang, chief China economist at Mizuho Securities in Hong Kong, said: "The government's moves to curb shadow banking and local government debt will cap the growth of investment."Shen Jianguang, chief China economist at Mizuho Securities in Hong Kong, said: "The government's moves to curb shadow banking and local government debt will cap the growth of investment."
Many analysts have said that curbing lending growth to address these concerns could would probably have a negative impact on China's economic growth.Many analysts have said that curbing lending growth to address these concerns could would probably have a negative impact on China's economic growth.
Growth boostGrowth boost
Chinese policymakers have taken various steps to open up new avenues of growth.Chinese policymakers have taken various steps to open up new avenues of growth.
This includes the launch of a free trade zone in Shanghai, seen as a test bed for reforms in key, and until now, tightly-controlled areas of the economy such as the financial and telecom sectors. These include the launch of a free trade zone in Shanghai.
Earlier this month, China said it will open some telecom services within the zone, including call centres and home internet access provision, to foreign firms. This is seen as a test bed for reforms in key areas of the economy, such as the financial and telecom sectors which have been tightly-controlled until now.
Earlier this month, China said it will open up to to foreign firms some telecom services within the zone, including call centres and home internet access provision.
It said it will also allow foreign firms to make gaming consoles within the free trade zone and sell them across China - lifting a ban on gaming consoles that has been in place since 2000.It said it will also allow foreign firms to make gaming consoles within the free trade zone and sell them across China - lifting a ban on gaming consoles that has been in place since 2000.
Other measures to be trialled inside the zone include market-driven interest rates.Other measures to be trialled inside the zone include market-driven interest rates.
China's banking regulator, China Banking Regulatory Commission, said earlier this month that "more policies will be issued to support banking reform in the Shanghai free trade zone".China's banking regulator, China Banking Regulatory Commission, said earlier this month that "more policies will be issued to support banking reform in the Shanghai free trade zone".
Many analysts have said that reforming and opening up these sectors is key to sustaining long-term growth in China.