China’s economy registered a flat growth of 7.7 percent last year, maintaining for the second year its slowest expansion in more than a decade as the government warned of “deep-rooted problems” including a mountain of local authority debt.
Gross domestic product (GDP) expansion for the October-December quarter also came in at 7.7 percent, the National Bureau of Statistics (NBS) said, slowing from 7.8 percent in the previous three months.
The 2013 GDP figure was the same as that for 2012, which was the worst rate of growth since 1999. It was still higher than the government’s growth target for the year, which was 7.5 percent.
“Generally speaking China’s economy showed good momentum of stable and moderate growth in 2013, which is (a) hard-earned achievement,” NBS chief Ma Jiantang told reporters.
“However, we should keep in mind that the deep-rooted problems built up over time are yet to be solved in what is a critical period for China’s economy,” Ma said.
Since the 1980s, China has shaken off the lethargy of the Communist command economy with market reforms that brought it years of blistering growth, making its GDP second only to the US and establishing it as the world’s biggest trading power in goods.
But the country is widely expected to face slower expansion in the years ahead.
Its leaders under President Xi Jinping say they are committed to transforming China’s growth model to one where consumers and other private actors play the leading role, rather than huge and often wasteful state investment.
“Judging from the data, our outlook for 2014 remains that China’s economy will continue slowing down in the first half,” Wendy Chen, Shanghai-based analyst for Nomura International, told AFP.
Within the past decade Chinese growth was regularly in double digits, but it has been on a slowing trend and the 2013 result shows GDP growth in single figures for three consecutive years for the first time since 2002.
Ma of the NBS said China faces problems including dealing with burgeoning local government debt.
“The foundation of economic growth remains to be consolidated, the internal driving forces of economic expansion need to be further fostered, the risk of local government debt should be prevented and greater efforts are to be made to weed out out-dated production capacity,” he said.
Besides shifting the growth emphasis, China’s leaders are also concerned about the country’s financial system including “shadow banking” and government debt, particularly at the regional level.
China late last month announced the results of a long-awaited debt audit, revealing that liabilities carried by local governments had ballooned to $2.95 trillion as of the end of June, up 67 percent from the end of 2010.
Local authorities have long used debt to fuel growth in their regions, often by pursuing projects that are not economically viable or sustainable.
While few see the problem as a systemic threat, the debt issue is considered to be a serious potential drag on China’s economy unless steps are taken to rein it in.
Analysts also say that shadow banking — non-transparent, less regulated credit — can stoke asset bubbles and threaten stability.