China’s economy slows down as it reaches its lowest growth rate in 25 years
Government figures indicate that growth reached 6.9 per cent in 2015. Growth in investment, a key economic driver, weakened to 12 per cent in 2015. As the government insists on the need to change the country’s development model "at any cost", it focuses on services and domestic consumption in lieu of manufacturing. However, this increases the risk of social instability as well as party repression.
Beijing (AsiaNews) – China's economy grew by 6.9 per cent in 2015, the lowest since 1990 (3.8 per cent) following the crackdown against the Tiananmen Square pro-democracy movement.
China's economic growth edged down to 6.8 per cent in the final quarter of 2015, slightly lower than the previous quarter (6.9 per cent). The October-December growth figure was in fact the lowest quarterly expansion since the aftermath of the global financial crisis, when growth slumped to 6.1 per cent in the first quarter of 2009. Growth in the July-September quarter of 2009 had been 6.9 per cent.
Beijing responded to ebbing growth by cutting interest rates six times since November 2014, and launched measures to help exporters and other industries, but disappointing results raise concerns about new loss of jobs.
Growth in investment, a key economic driver, dropped to 12 per cent in 2015, down 2.9 percentage points from the previous year.
Wang Baoan, head of the statistics bureau, told a press conference in Beijing that the government was confident the economy would grow steadily in 2016, despite the complex global financial situation. Beijing had set an official growth target of "about 7 per cent".
Chinese leaders are trying to redirect the economy towards more sustainable growth, based on domestic consumption and services, to replace a worn-out model based on exports and investment.
They are partly there, as services became the main component in China’s economy in 2013, overtaking manufacturing. Services and consumption now make up 50.5 per cent of the economy, up from 48.5 per cent in 2014.
Monthly industrial production and retail sales numbers were released on Tuesday, with both December numbers coming in just slightly worse than expected. Industrial production - or factory output - expanded 5.9 per cent in December, down from 6 per cent in November. Retail sales grew by 11.1 per cent, down from 11.3 per cent in November.
In March, Prime Minister Li Keqiang said that weaker growth would be acceptable as long as enough new jobs were created.
Helped by yesterday’s plunge in European shares, operators on Asian markets have shown greater optimism as it is the last month on the Chinese calendar, which is traditionally seen as positive. Many are betting that Beijing will further stimulate the economy.
Tokyo closed with a gain of 0.55 per cent, whilst Shanghai and Hong Kong were up even more, 3 and 1.5 per cent respectively.
On Asian markets, oil was trading at around US$ 30 a barrel: West Texas Intermediate (WTI) was going for US$ 30.58 a barrel with Brent crude at US$ 29.20.
However, on the long run, equity markets cannot be the basis of China’s transition. Economic downturns undermine political stability; fewer jobs and less money in people's pockets increase the potential for civil unrest.
Since China opened up and began its reforms in the 1970s and 1980s under Deng Xiaoping, the legitimacy of the Communist Party has been based on its capacity to deliver economic growth.
As growth sharply slows, risks go up. Since Xi Jinping came to power, “the authorities have tightened control on society. More lawyers have been arrested. As people seek solace in religion, the authorities try to hold it back,” wrote John Ai. Likewise, “Internet censorship is get stronger,” he added.
“The comprehensive control of society is indicative of the authorities’ concern about social unrest. In September, Politburo member Wang Qishan openly discussed the party’s legitimacy for the first time. Although official media hailed his speech as ‘ground-breaking’ and ‘a manifestation of the party’s confidence’, it also shows that the party has become aware of potential risks and looming crises.”