|China's GDP grows by 9% in 2008|
China's economy cooled to its slowest pace in seven years in 2008, expanding 9 percent year-on-year as the widening global financial crisis continued to affect the world's fastest-growing economy, official data showed Thursday.
Gross domestic product (GDP) reached 30.067 trillion yuan (4.4216 trillion U.S. dollars) in 2008, Ma Jiantang, director of the National Bureau of Statistics (NBS), told a press conference.
The 9-percent rate was the lowest since 2001, when an annual rate of 8.3 percent was recorded, and it was the first time China's GDP growth fell into the single-digit range since 2003.
The year-on-year growth rate for the fourth quarter slid to 6.8 percent from 9 percent in the third quarter and 9.9 percent for the first three quarters, according to Ma.
Economic growth showed "an obvious correction" last year, but the full-year performance was still better than other countries affected by the global financial crisis, said Zhang Liqun, a researcher with the Development Research Center of the State Council, or cabinet.
He attributed the fourth-quarter weakness to reduced industrial output as inventories piled up amid sharply lower foreign demand.
Exports, which accounted for about one-third of GDP, fell 2.8 percent year-on-year to 111.16 billion U.S. dollars in December. Exports declined 2.2 percent in November from a year earlier.
Industrial output rose 12.9 percent year-on-year in 2008, down 5.6 percentage points from the previous year, said Ma.
SEEKING THE BOTTOM
Government economist Wang Xiaoguang said the 6.8-percent growth rate in the fourth quarter was not a sign of a "hard landing," just a necessary "adjustment" from previous rapid expansion.
"This round of downward adjustment won't bottom out in just a year or several quarters but might last two or three years, which is a normal situation," he said.
A report Thursday from London-based Standard Chartered Bank called the 6.8-percent growth in the fourth quarter "respectable" but said the data overall presented "a batch of mixed signals."
It said: "We probably saw zero real growth in the fourth quarter compared with the third quarter, and it could have been marginally negative."
The weakening economy has already had an impact on several Chinese industrial giants. Angang Steel Co. Ltd. (Ansteel), one of the top three steel producers, said Wednesday net profit fell 55 percent last year as steel prices plunged. It cited weakening demand late in the year.
However, officials and analysts said some positive signs surfaced in December, which they said indicated China could recover before other countries.
December figures on money supply, consumption, and industrial output showed some "positive changes" but whether they represented a trend was unclear, said Ma.
Outstanding local currency loans for December expanded by 771.8 billion yuan, up 723.3 billion from a year earlier, according to official data.
Real retail sales growth in December accelerated 0.8 percentage points from November to 17.4 percent. Industrial output also accelerated in December, up 0.3 percentage points from the annual rate of November.
Wang Qing, Morgan Stanley Asia chief economist for China, said GDP growth would hit a trough in the first or second quarter. China will perform better than most economies affected by the global crisis and gradually improve this year, he said.
Zhang also predicted the economy will touch bottom and start to recover later this year, depending on the performance in January and February.
Zhang forecast GDP growth of more than 8 percent for 2009, based on the assumption that domestic demand and accelerating urbanization would help cushion China from world economic conditions.
Wang Tongsan, an economist with the Chinese Academy of Social Sciences, said whether GDP growth exceeds 8 percent this year depends on how the world economy performs and how well the government stimulus policies are implemented.
Ma characterized the "difficulties" China experienced in the fourth quarter as temporary, saying: "We should have the confidence to be the first country out of the crisis."
Overall, the economy maintained good momentum with fast growth, stable prices, optimized structures and improved living standards, said Ma.
China's performance was better than the average growth of 3.7 percent for the world economy last year, 1.4 percent for developed countries and 6.6 percent for developing and emerging economies, he said, citing estimates of the International Monetary Fund.
"With a 9-percent rate, China actually contributed more than 20 percent of global economic growth in 2008," said Ma.
He said the industrial structure became "more balanced" last year, with faster growth of investment and industrial output in the less-developed central and western regions than in the eastern areas.
Meanwhile, energy efficiency improved: energy intensity, the amount of energy it takes to produce a unit of GDP, fell 4.21 percent year-on-year in 2008, a larger decrease than the 3.66 percent recorded in 2007, said Ma.
WORRIES ABOUT CONSUMPTION
A slowing economy poses a concern for the authorities, which they have acknowledged several times in recent weeks, as rising unemployment could threaten social stability. It could also undermine consumer spending, which the government is counting on to offset weak external demand.
The government has maintained a target of 8 percent annual economic growth since 2005.
China announced a 4 trillion-yuan economic stimulus package in November aimed at boosting domestic demand.
Retail sales rose 21.6 percent in 2008, 4.8 percentage points more than in 2007, said Ma.
Ma said he believed domestic consumption would maintain rapid growth as long as personal incomes continue to increase and social security benefits improve.
Urban disposable incomes rose a real 8.4 percent last year, while those of rural Chinese went up 8 percent, he said.
Analysts have warned that consumption could be affected if low rates of inflation deteriorate into outright deflation and factory closures result in more jobless migrant workers.
The urban unemployment rate rose to 4.2 percent at the end of 2008, up 0.2 percentage point year-on-year.
Ma said about 5 percent of 130 million migrant workers had returned to their rural homes since late 2008 because their employers closed down or suspended production. Other officials have said that 6.5 percent or even 10 percent of migrant workers have gone home after losing their jobs.