GDP grew 7.7% in the fourth quarter over the same period a year earlier, representing a slowdown from 7.8% growth in the third quarter. The weakness came in production and investment, while consumption and property construction held up well.
Emerging Markets Economist at Schroders Craig Botham said the figures may reflect tighter credit conditions. The Chinese government has been trying to curb excessive lending in the country after fears of a credit boom.
Botham also pointed out that export weakness acted as a greater drag on growth than it had in the third quarter. He added: "That this occurred despite a strong merchandise trade performance this quarter suggests deterioration in the service trade balance." He also pointed out that investment contributed a lower amount to growth – 4.2% versus 4.3% in the last quarter.
He adds: "Encouragingly for the drive to rebalance, consumption’s contribution climbed…However, this remains below pre-2013 levels, and includes government expenditure, so any optimism should be very limited."
He is encouraged that retail sales grew 12.2% year on year in real terms, the highest growth rate for a year, but says the property sector might be about to slow as sales contracted in December. He concluded: "While China managed a fairly strong end to 2013, we see weakness ahead. Though exports should perform well as the global recovery plays out, the outlook for investment is bleaker than it has been for years. The push to tighten credit and rebalance the economy could be claiming its first victims, though we expect reformers will slow their pace if the body count climbs too high."
Fund managers have seen slower economic growth as a natural consequence of attempts to curb credit growth and rebalance the Chinese economy. Christopher Molumphy, chief investment officer of the Franklin Templeton Fixed Income Group says: "In what we regard as a welcome development, it appears that China’s economy will likely no longer grow at the double-digit annual rates seen in the previous decade as policymakers try to wean it away from an oversized dependency on fixed investment and continue instead to promote consumer demand in order to produce more balanced growth."
