BEIJING: China on Monday revised downward last year’s growth figure, already the weakest in a quarter-century, days after worries about slowing expansion in the world’s second-largest economy caused global stock market havoc.
China is a main driver of the world economy, its biggest trader in goods and a key market for commodities, so its troubles can have worldwide repercussions.
Officials acknowledged that China’s own stock exchanges had seen “bubbles,” after a spectacular debt-fuelled rally was followed by a painful bust which huge interventions have failed to reverse, but said the turbulence was coming to an end.
The National Bureau of Statistics said that after a “preliminary confirmation” it reduced the 2014 gross domestic product (GDP) growth figure to 7.3 percent from the 7.4 percent announced in January. A final confirmation could come in January 2016, it added.
The new number remains the lowest since 1990, when expansion plummeted to 3.9 percent.
After decades of double-digit expansion, authorities are attempting a tricky rebalancing—from an investment- and export-led economic model to one where domestic consumer demand drives slower but more sustainable growth.
Finance minister Lou Jiwei told a G20 meeting of finance ministers and central bank governors in Ankara at the weekend that the economy had entered a “new normal.”
Growth was expected to remain at “around 7 percent”—the government’s 2015 target—he said, adding: “The situation may sustain for four to five years.”
Chinese growth slowed from last year in the first two quarters of 2015, reaching 7.0 percent in both periods.
Nomura International analyst Wendy Chen said Monday’s GDP correction was largely related to service sectors, which were key to the overall transition but had lower growth than earlier figures showed.
“This means China’s economic structure did not improve as well as expected,” she told Agence France-Presse.
The downward GDP revision comes with many analysts having long expressed doubts over whether official statistics are manipulated for propaganda or other purposes.
Adding up provincial GDP figures regularly produces a larger total than the official one for the country as a whole.
Skepticism was heightened when this year’s second-quarter GDP came out in line with the government’s full-year target despite a series of downbeat indicators during the period.
Even Premier Li Keqiang reportedly once expressed doubts, telling the then-US ambassador in 2007 that some Chinese data were “man-made” and thus unreliable.
Forex reserves fall
The National Development and Reform Commission, China’s top economic planning agency, played down growth concerns Monday, saying electricity consumption and railway cargo transport improved in August.
Property prices and transaction volumes also rose, it said in a statement, predicting the economy would be “able to achieve the full-year expansion target.”
China last month reduced interest rates for the fifth time since November and cut the amount of money banks must hold in reserve.
But data showing an official gauge of Chinese manufacturing at a three-year low sent world markets into a tailspin last week, as investors gave vent to worries the economy is headed for a hard landing.
Investors have also been alarmed by the authorities’ surprise move last month, lowering the yuan’s central rate against the US dollar by nearly five percent in a single week.
The country’s foreign exchange reserves fell by a record $93.9 billion last month, Bloomberg News reported, as Beijing sold dollars to support the yuan following jitters over the devaluation.
The benchmark Shanghai Composite Index closed down 2.52 percent, or 79.75 points, at 3,080.42 on Monday.
‘Risks and bubbles’
Chinese stocks have plummeted around 40 percent since mid-June, after soaring more than 150 percent in the previous 12 months in a spectacular debt-fuelled rally encouraged by authorities.
Official interventions costing hundreds of billions of dollars failed to stop the country’s worst market rout in almost two decades.
“Bubbles continued to build up until mid-June,” People’s Bank of China (PBoC) Governor Zhou Xiaochuan said at the G20 meeting, according to a statement on the PBoC website.
“The correction in the stock market has now come close to an end,” Zhou said, adding the Chinese economy was not “much affected” by the rout.
The market regulator, the China Securities Regulatory Commission (CSRC) sought to reassure investors, even as it echoed Zhou’s comments.
Previous gains “had been too rapid and large, forming stock market bubbles, therefore subsequent plunges and adjustments were inevitable,” it said in a statement, adding the “risks and bubbles have been released to some extent.”
Investors fear the government will cut back its interventions—even though these have raised questions over its ability to manage the economy and its commitment to reforms.
But the CSRC said authorities “will absolutely not sit back” if “fierce and abnormal volatilities take place in the stock market and may trigger systemic risks.”
“We will take decisive and multiple measures to stabilize the market in a timely manner.” AFP