China Economy

Growth data shows mixed picture

Fixed-asset investment slowdown mars positive GDP figures, casts shadow over recovery

PUBLISHED : Saturday, 19 January, 2013, 12:00am
UPDATED : Saturday, 19 January, 2013, 5:12am


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The mainland economy turned the corner in the last quarter by growing faster than expected after seven straight quarters of slowdown, but economists fear weaker investment growth may limit the room for further gains.

The mixed picture may keep market sentiment cautious till policy direction becomes clearer after the annual legislative session in March when Li Keqiang officially takes over from Wen Jiabao in running the economy.

Gross domestic product growth rebounded to 7.9 per cent in the last quarter of 2012, beating market expectations for a 7.8 per cent gain and more than the 7.4 per cent growth in the third quarter. For the full year, the economy grew 7.8 per cent, after 9.3 per cent growth in 2011.

Industrial production and retail sales accelerated in December by 10.3 per cent and 15.2 per cent year on year, compared with 10.1 per cent and 14.9 per cent respectively in November.

Yesterday's data saw the Shanghai stock market close 1.4 per cent higher at 2,317.07 points.

However, fixed-asset investment, a major driver behind a recent uptick in economic momentum, grew at a slower pace.

According to calculations by Societe Generale's Yao Wei, fixed-asset investment growth decelerated to 20 per cent year on year in December from 20.7 per cent in November and 22.2 per cent in October.

While infrastructure investment strengthened, nearly all the other sectors weakened, including manufacturing and property.

"The pattern adds to the concern that the economy has become too reliant on state-driven investment, which in turn hinges on local governments' credit access," Yao said.

The extent of the recovery and how long it will last "will depend on the government's credit and property policies this year, and to a smaller extent on global demand for Chinese exports", said UBS Securities' Wang Tao.

She expects Beijing to keep a balance between credit growth and managing shadow banking risks, with yuan loans expected to grow by about 8.5 trillion yuan (HK$10.59 trillion) this year.

According to Ma Jiantang, head of the National Bureau of Statistics, end-consumption contributed 51.8 per cent to last year's GDP growth, capital formation contributed 50.4 per cent, while that from net exports was a negative 2.2 per cent.