Credit clampdown puts the brakes on Chinese economy
China’s economy last year registered flat growth of 7.7 per cent, maintaining its slowest expansion in more than a decade
Tuesday 21 January 2014
China’s economy will lose further momentum this year as Beijing clamps down on credit conditions, experts warned yesterday.
The concerns come as the latest official figures show the Red Dragon’s growth decelerated from 7.8 per cent to 7.7 per cent in the final three months of last year as its factories churned out goods at their slowest pace for five months, and investment and exports weakened.
The fourth-quarter performance left annual growth for the world’s second-biggest economy at 7.7 per cent – the same pace as 2012, which was the weakest since 1999. The result would have been even weaker if not for the mini-stimulus programme launched by Beijing last year in response to wobbling export demand.
The International Monetary Fund has forecast China’s growth this year at 7.6 per cent, but some forecasters say a figure as low as 7.2 per cent is likely. While still strong by Western standards, this would be China’s weakest performance since 1990.
Beijing is attempting to shift the economy towards consumption-led growth and also focusing attention on the nation’s shadow banking system. This has grown strongly in the past three years as banks aim to skirt capital and loan-to-deposit rules by lending through complex trust structures, which have become one of the biggest lenders to local governments. The central bank has also tightened conditions in China’s financial system to ward off inflation.
Wei Yao, an analyst at Société Générale, said: “The growth momentum has started to weaken and we expect more deceleration ahead, as policymakers have moved to rein in credit growth.”
Economists currently believe China will grow at 7.5 per cent this year.
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