China Economic Growth Slowest in 25 Years

The release of economic data from China showed a 6.9% growth rate for last year， dropping from 7.3% in 2014 and resulting in its slowest growth in 25 years.

Although only 0.1% lower than Beijings prediction for 2015， there were concerns about global deflation and the effect Chinas consistently slowing economy would have on many other countries that are dependent on China for trade. The IMF has also lowered its predictions for Chinas growth rate to 6.3% in 2016 and 6.0% in 2017.

However， many economists believe that there is no reason to panic. “The IMF forecast for Chinese growth is not new or too much out of consensus”， says Tao Wang， chief economist at UBS.

Given Chinas economic restructuring to move focus towards tertiary industries and away from manufacturing and state-funded investments， the slowed growth rate is not unexpected. Having experienced doubledigit growth for more than a decade – during which it replaced Japan as the worlds second-biggest economy– China is now going through a painful period of readjustment as growth inevitably slows.

Its structural transformation from an economy heavily reliant on industrial exports to a more serviceoriented one was still in progress， the statistics bureau said in a statement.

Since 2010， the rate of growth has decreased consistently alongside the percentage of GDP being contributed to manufacturing.

According to China Daily， the service industry contributed to 50.5% of GDP last year， 10% more than the manufacturing industry and an increase from 48.1% in 2014.

Some Analysts are also cautiously optimistic about the Chinas fortunes.

“I think that at least the biggest fears about the real economy， fears that came to the surface during the stock market rout ... I think those biggest fears were overblown，” said Louis Kuijs， head of Asia economics at Oxford Economics in Hong Kong.

“We dont see signs of an abrupt slowdown， or something getting worse than we had expected say six weeks ago.” He added.

Gordon Kwan， a Hong Kong-based analyst at Nomura Holdings， said： “Chinas GDP growth is not collapsing， even though the fourth-quarter figures are slightly lower than expectations.”

Kwan said he expected additional government stimulus， but added that the Chinese economy was “in decent shape， despite the recent hype about how it is on the verge of collapse”.

He believed the rest of the world would take positives from the data. “Judging by whats happening in the markets now， there will be a sigh of relief that quarterly growth was 6.8% and not， say 6%，” he said. “But its early days yet – the real test will be the first-quarter GDP figures.”

Premier Li Keqiang remains undeterred by Chinas performance， stating at Davos that he believes Chinas economy to be “performing within the reasonable range.”

Yet， while the impact of the slowdown so far seems to be minimal， IMF warns that fears over global deflation could become a self-fulfilling prophecy.