China posts weakest annual growth in 24 years, more stimulus expected

Wednesday, 21 January 2015 00:04 - - {{hitsCtrl.values.hits}}

Reuters: China’s economic growth held steady at 7.3% in the fourth quarter from a year earlier, slightly better than expected but still hovering at its weakest since the global financial crisis, keeping pressure on policymakers to head off a sharper slowdown.

Jason Lee A worker rides past a poster showing Beijing's central business district outside a construction site in Beijing, December 29, 2014. The world's second-largest economy grew 7.4 percent in the whole of 2014, the National Bureau of Statistics said on Tuesday, undershooting the government's 7.5 percent target and the weakest expansion in 24 years – Reuters The world’s second-largest economy grew 7.4% in the whole of 2014, the National Bureau of Statistics said on Tuesday, undershooting the government’s 7.5% target and the weakest expansion in 24 years. It was the first since 1999 that the government had missed a yearly growth target for gross domestic product (GDP). The China statistics bureau said at a news conference that the economy faces difficulties but it will keep growth within a ‘reasonable range’. A series of incremental market reforms and modest stimulus measures over the year did little to reverse a slowdown in the property market, and industrial overcapacity, slowing investment and erratic exports remain challenges for policymakers this year. However, if Beijing’s goal was allow a modest slowdown in the name of pushing painful reforms without setting off a collapse, then 2014 could be viewed as a qualified success; reported unemployment rates remain low and social unrest appears contained for now. “This is the best possible miss you could have from a messaging standpoint,” said Andrew Polk, economist at the Conference Board in Beijing. “The government is saying, ‘we’re not married to this specific target, we missed it and we’re okay.’ That seems to me a quite positive development.” However, Polk added that the GDP figure was difficult to square with some of the negative underlying numbers. On a quarterly basis, the economy expanded 1.5% in Oct-Dec from the previous three months, slower than expectations for 1.7% growth and 1.9% in July-Sept. While growth in December industrial output and retail sales pipped expectations, power output rose only slightly from a year earlier, while fixed asset investment was a bit cooler. Policymakers showed increasing signs of discomfort in the second half of the year as economic indicators began to consistently surprise on the down side, culminating in an unexpected cut to guidance lending rates by the central bank in November.

IMF welcomes slower growth as China rebalances economy

Reuters: The slowdown in China’s economy reflects a welcomed decision by the Chinese government to re-balance the world’s second-largest economy, the chief economist of the International Monetary Fund (IMF) said on Tuesday. Olivier Blanchard, the IMF’s chief economist, made the remarks at a news conference after the fund released its world economic outlook. Blanchard’s comments followed data from China that showed the Chinese economy grew 7.3% in the fourth quarter, hovering near a six-year low not seen since the global financial crisis.

China raises wages for govt workers at least 31%

BEIJING (Reuters): China has raised the wages of government workers by at least 31%, according to a document seen by Reuters on Tuesday, as part of efforts to combat corruption and lift the spending power of millions as the country seeks to increase consumption. The basic salaries of some civil servants would be almost tripled, according to the document distributed to China’s cabinet and dated 12 January. It said the increases would be effective from 1 October, 2014. The change is part of a broad effort by Beijing to reform the compensation levels of government workers to improve efficiency, reduce graft and hold officials more accountable for their own performance. Executives at some Chinese state-owned companies, notorious for their inefficiency, suffered pay cuts this month. “The pay hike indicates Beijing’s goal of improving the quality of life for the average Chinese,” Nomura economists said in a note. They said it was the first wage rise in eight years for central government workers. Hu Xiaoyi, vice minister at the Ministry of Human Resources and Social Security, told reporters on Monday that the cabinet has agreed to “adjust” the basic wages of civil servants. The ministry, which produced the document, declined comment on Tuesday. As part of the revision, subsidies and performance bonuses for government workers would be frozen, the document said. Even after the pay increase, the salaries of Chinese state workers remain low. The monthly salary of ordinary government workers is as low as 510 yuan ($ 82), while the standard monthly salary of China’s most senior leaders, including President Xi Jinping, starts from 5,250 yuan ($ 845), the document showed.