For the first time in two and a half years, China’s GDP a registered single digit growth in 2011 due to the global financial crisis and a decline in exports. Despite the drop in GDP, the numbers were still higher than the government’s 8% growth target. The Los Angeles Times reports:
Compared with the same period a year earlier, the country’s gross domestic product grew by 8.9% in the fourth quarter of 2011, down from 9.1% in the previous quarter, China’s National Bureau of Statistics said Tuesday.
For the year, the world’s second-largest economy expanded by 9.2%, off from 10.4% in 2010.
Fears of widespread unrest abounded after China’s economic growth slumped to 6.8% during the depths of the 2008 financial crisis and an estimated 20 million migrant workers were out of jobs.
Beijing responded to that crisis by introducing an unprecedentedly large stimulus package that ultimately fueled the property bubble and high rates of inflation that bind policymakers today.
Exceeding the government’s target, the drop in GDP seems to support the claims of a soft-landing. For 2012, the economy is expected to continue to slowdown, but the government claims that the target is long-term economic growth. The Sydney Morning Herald adds:
The slowdown was in line with government plans, said Ma Jiantang, commissioner of the National Bureau of Statistics. He said the “ideal situation” would be to keep growth between 8.5 per cent and nine per cent, with inflation low.
In 2012, China faces “complexity and challenges” due to global malaise and pressure for prices to rise, Ma said at a news conference. Still, he said, “The fundamentals of China’s long-term steady economic growth have not changed.”
Consumer inflation, a volatile element in a society where poor families spend up to half their incomes on food, edged down in December to 4.1 per cent after hitting a 37-month high of 6.5 per cent in July.
Analysts expect Beijing to try to stimulate growth with an interest rate cut, tax cuts or other measures. The central bank promised pro-growth measures this month to help entrepreneurs though it also pointed to inflation pressures and global uncertainties and said its monetary policy will stay “prudent.”
The stronger-than-expected growth in China coupled with the speculation over a possible government stimulus helped rally stocks worldwide, AP reports:
With Europe seemingly heading back into recession and the U.S. still to convince that it’s economy is improving, China is important to shore up the global economy as well as sentiment, especially at a time when many investors are openly fretting about a potentially-devasting Greek debt default that could prompt further turmoil in financial markets.
Government figures showed that the slowdown in Chinese growth in the final quarter of 2011 was not as big as had been feared. Though the drop to 8.9 percent represented the lowest rate in two and a half years, the markets had been expecting a bigger decline to 8.7 percent.
The data from China also helped commodity prices push higher with sweet crude for February delivery up around $1.56 at $100.26 on the New York Mercantile Exchange by late in Europe. At the same time, gold for February delivery was $30.20 higher at $1,661.00 per troy ounce on the Comex division of Nymex.
In Europe, market participants were comforted by the widely watched German ZEW index, which rose to -21.6 in January from December’s unrevised -53.8. Experts in a poll by Dow Jones Newswires had expected a rise to -49.5 for January.
The recent macro data from China and the U.S. indicate that the global economy at least have two decent growth engines to rely on, despite the continuing euro crisis, said Anders Eklöf, strategist at Swedbank.