China’s economic growth slumps to slowest pace in 25 years

The data — in line with a median forecasts in an AFP survey — was welcomed by strong gains on markets in China and across Asia and Europe as dealers bet on a new round of monetary easing measures, including more interest rate cuts.

Global markets have been hammered in recent weeks by worries over China, the world's number two economy, wiping trillions off valuations.

“Expectations for further cuts in interest rates and banks' reserve ratios increased after the economic figures,” Zhang Gang, an analyst at Central China Securities, told AFP.

China's leaders — who targeted growth of “about seven percent” — are looking to transform the economy away from the investment and exports of the past to one more oriented towards domestic consumer demand.

The services sector accounted for 50.5 percent of gross domestic product (GDP) in 2015, the first time it was more than half the economy, the National Bureau of Statistics (NBS) said as it released the figures.

The structural transformation was still underway, it added, calling it “a crucial period during which challenges need to be overcome and problems need to be resolved.”

Last year's growth was well below the 7.3 percent of 2014.

NBS chief Wang Baoan told reporters that this year would be “more or less the same as in 2015 and China's economic growth will still face a complicated and volatile international situation,” but said he was confident growth will “remain stable.”

The Communist party is widely expected to lower the growth target this year, and President Xi Jinping has said expansion of 6.5 percent will be sufficient for China's needs.

“It’s a very difficult balancing act for the Beijing authorities,” Standard Bank China economist Jeremy Stevens told AFP. “What we expect is growth to slow, and them to limp ahead with the reforms they can, at the time that they can.”

Questions have repeatedly been raised about the accuracy of official Chinese economic statistics, which critics say can be subject to political manipulation.

Professor Hu Xingdou from the Beijing Institute of Technology said the official figures provided a more optimistic view than the actual situation in China.

“It is an estimation and the samples they collected for the statistics almost all came from state-owned enterprises. Therefore, the result will be higher than the real situation,” Hu told the DPA news agency.

Unexpected moves in the yuan exchange rate — after a surprise devaluation in August — have also disturbed investors in recent weeks, with fears the real picture is worse than portrayed and authorities may not be able implement reforms to make the economy more market-driven.

Julian Evans-Pritchard, China economist for Capital Economics, said in a note: “The continued stability of the official GDP figures will do little to assuage concerns over their credibility.”

While official figures should not be taken at face value, he said, the data “don’t suggest that China is now entering a deeper economic crisis” and his group expects China's results “to gradually turn more upbeat over the next few months.”

But some economists forecast a rockier year.

Zhao Yang of Nomura reiterated the bank's 5.8 percent forecast for 2016 due to “strong headwinds” and overcapacity in manufacturing, along with an excess supply of property.

China's industrial production, which measures output at factories, workshops and mines, rose 5.9 percent year-on-year in December, the NBS said, and retail sales, a key indicator of consumer spending, were up 11.1 percent — both below the forecasts in a survey by Bloomberg News.

Fixed asset investment, a measure of spending on infrastructure, expanded 10.0 percent in the year — its weakest since 2000.

Al Jazeera and Agence France-Presse