China’s economy expands at the slowest rate in 21/2 years
China’s economy grew at its slowest pace in 21/2 years in the final three months of 2011, weighed down by shrinking exports, tighter bank lending and a cooling real estate market.
The country’s gross domestic product expanded at an annual rate of 8.9% in the fourth quarter of 2011, compared with 9.8% in the year-earlier period, China’s National Bureau of Statistics said Tuesday. For the year, the world’s second-largest economy expanded 9.2%, down from 10.4% in 2010.
Although still strong compared with that of other major economies, China’s economic growth is slowing uncomfortably fast for the country’s leadership.
Many analysts expect conditions to worsen because Europe, China’s biggest export market, shows no signs of stabilizing. Some economists project China’s gross domestic product growth dipping to an annualized rate of about 7.5% in the first quarter.
China’s communist government has targeted 8% annual GDP growth as the rate necessary to maintain social stability.
Fears of widespread unrest spread during the depths of the 2008 financial crisis when China’s economic growth rate slumped to 6.8% and an estimated 20 million migrant workers were out of jobs.
Beijing responded to that crisis by introducing a massive stimulus package that ultimately fueled the property bubble and high rates of inflation that hamper policymakers today.
With little room for aggressive public spending, analysts said the central government may use other means to rebalance the economy toward consumption. Those might include lowering taxes and boosting loans to the private sector to get consumers and businesses to spend.
“At this juncture, the challenge for policymakers is to implement measures that boost domestic demand without setting back progress made in curbing inflation,” said Jing Ulrich, chairman of global markets for JPMorgan Chase & Co.
Such reform will require an acceptance of slower growth in a country that still considers itself in the early stages of development. China’s economy is still about half the size of the U.S. economy.
