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Article / 20 January 2014 at 9:34 GMT

Chinese Q4 GDP growth slows marginally to 7.7%

• China's Q4 GDP growth slows to 7.7% from Q3's 7.8%
• Prolonged slowdown poses potential test for Beijing's leadership
• Signs that efforts to rebalance economy are starting to emerge

By Mads Koefoed

Bottom line: China reported Q4 GDP overnight, which showed a deceleration in its economic output to 7.7 percent year-on-year from 7.8 percent earlier. I expect growth to slow slightly this year.

Chinese economy

Details: The world's second-largest economy beat the consensus GDP estimate of 7.6 percent year-on-year, but nevertheless saw a decline in the growth rate to 7.7 percent in Q4 from 7.8 percent a quarter earlier. Sequentially, growth dropped to 1.8 percent from 2.2 percent while consensus had penciled in a 2 percent estimate.

Should the slowdown in the economy continue over the coming quarters, the (relatively) new leadership will be tested, but the GDP report actually revealed that some of the necessary adjustments needed in the Chinese economy are starting to take place, albeit only very gradually. The credit-fuelled investment binge in China continues, but did slow down slightly in the fourth quarter to 20.3 percent year-on-year from 20.5 percent in Q3 and even more in the first half of 2013.

The very modest slowdown in investment and credit — new yuan loans rose 8.4 percent in 2013 vs. 11.9 percent in 2012 — is not enough to either quickly rebalance the economy or send growth substantially lower. Furthermore, some smallish public-sector stimulus programmes will aid economic growth in the shorter term, which is why I only expect a slight slowdown overall this year to somewhere in the range of 7 to 7.5 percent from 7.7 percent in 2013.

china worker

China's Q4 GDP suggests it is slowly beginning to wind down its infrastructure-building projects. Photo.



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