China’s GDP growth slowest in 25 years

Official figures released show China’s economy has grown at its slowest pace since 1990, bringing about fresh fears following the permutation of the global capital markets.

Data released by the National Bureau of Statistics on Tuesday showed the full-year growth of 6.9% was in line with government expectations of around 7%, falling slightly from the 2014 level of 7.3% [1].

Investors are keen for clues as to whether this means there are signs of distress in the economy, or whether policymakers can engineer a gradual slowdown that avoids financial crisis and instability [2].

The falling demand for steel is now ‘the norm’ in industry sectors, with consumption declining 4.6% last year according to the China Iron and Steel Association. This has a knock-on effect to the economy as a whole, with China being a heavy goods exporter [2].

China is increasingly becoming a ‘two-speed economy’, as the country becomes more developed. The percentage of GDP contributed by the services sector has expanded significantly in recent years, and now accounts for over half of the country’s output.

Equities rose following the data; the benchmark Shanghai Composite Index closed 3.2% higher [4], while the Shenzhen Composite Index closed 3.6% higher [3].

China’s industrial production measuring output at factories rose 5.9% year-on-year in December and, while retail sales were disappointing, spending on infrastructure expanded by 10% in the year [3], meaning there are provisions in place for future growth once the economy becomes more robust.

Gordon Kwan, Analyst at Nomura Holdings in Hong Kong believes the rest of the world would take positives from the data: “Judging by what’s happening in the markets now, there will be a sigh of relief that quarterly growth was 6.9% and not, say, 6%. But it’s early days yet – the real test will be the first-quarter GDP figures,” he said [1].

NBS Director, Wang Baoan, agrees: “We think in 2016 China’s economic growth will remain stable. We are confident in that” [3]. Analysts have predicted GDP growth of 6.5% going forward [1].


[1] The Guardian. ‘China economy grows at slowest pace in 25 years, latest GDP figures show’.

[2] Financial Times. ‘China annual GDP growth of 6.9% lowest since 1990’.

[3] The Telegraph. ‘China’s GDP growth slowest in 25 years’.

[4] Bloomberg. ‘China GDP slows to weakest since 2009 on manufacturing slide’.