China Economic Update – 21 January 2014

China’s latest National Accounts data shows that the economy grew by 1.8% quarter on quarter in December, and 7.7% year on year – representing a marginal slowdown from the September quarter (when yoy growth was 7.8%).

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China’s latest National Accounts data shows that the economy grew by 1.8% quarter on quarter in December, and 7.7% year on year – representing a marginal slowdown from the September quarter (when yoy growth was 7.8%). For the full year,China’s economy expanded by 7.7%, marginally below the rate of growth in 2012, and therefore the slowest rate of growth since 1999.

The easing in economic activity in the December quarter was broadly in line with our expectations and was consistent with partial indicators during the quarter that pointed to a modest slowing in industrial production. A slowing in government stimulus flowed through into softer industrial activity, while a crackdown on measures to circumvent capital controls contributed to slower export growth in the second half of 2013.

Despite intentions to rebalance the economy, the main contributor to China’s economic growth in 2013 was investment (which contributed 4.2 ppts to growth), followed by consumption (with 3.9 ppts). Investment was boosted in the middle of the year by the mini-stimulus program, which was largely focussed on infrastructure spending. In contrast, net exports were modestly negative for economic growth, at -0.3 ppts (the weakest export contribution since Q3 2012).

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