CHINA’S ECONOMY grew at its slowest pace in 13 years in 2012, though a year-end spurt supported by infrastructure spending and a jump in trade indicated that the stable growth path Beijing says is vital for economic reform may be in sight.
Evidence of a recovery in exports, stronger-than-expected industrial output and retail sales, together with robust fixed asset investment, all suggested that Beijing’s pro-growth policy mix has gained sufficient traction to underpin a revival without yet igniting inflationary risks.
Year-on-year growth of 7.9 per cent in the fourth quarter snapped a streak of seven consecutive quarters of slowdown.
The performance was at the upper end of the 7 to 8 per cent rate economists reckon is needed to deliver on reforms essential to China’s long-term development after three decades of double-digit growth.
Full year growth of 7.8 per cent was also just ahead of the 7.7 per cent call in a poll of economists and, although the weakest since 1999, comfortably ahead of the government’s 7.5 per cent target, which just months ago seemed to some to be in jeopardy.
“It’s kind of like a golden spot – stronger growth, but not strong enough to trigger a lot more inflationary concern. That’s perfect for equity markets.” said Dariusz Kowalczyk, Asia ex-Japan senior economist and strategist at Credit Agricole CIB in Hong Kong.
“What everybody wants is growth that’s strong enough to give us peace of mind that revenues will increase and there is no hard landing risk, but not excessive, not strong enough to trigger inflation. And this is what I think we are getting.”
Market reaction was upbeat, with Asian shares advancing, while oil traders took the opportunity of data confirming the recovery to book profits.
