CHINA’S ECONOMIC GROWTH for 2013 officially came in at 7.7%, topping the government’s 7.5% target — surprise, surprise — but underlining that the days of double digit growth are truly done. The figure was barely above private economists’ consensus forecast of 7.6% growth, which would have been the slowest growth rate in 14 years.
The full-year figure only matched 2012’s rate thanks to an old-school mini-stimulus in the third quarter. Growth tapered off in the fourth quarter as the central bank reigned in credit growth.
This year’s GDP growth is likely to slide below the 7.5% mark (see update below). China’s economy is on a glide path towards more sustainable, higher quality growth as the country rebalances from investment and export fueled growth to that driven by domestic consumption. Fixed-asset investment growth in 2013 fell to 19.6%, its lowest rate in a decade.
The challenge for the new leadership is to make that transition through some politically difficult reforms while maintaining sufficient economic growth to keep a lid on unemployment and its assumed threat to social stability and thus the Party’s monopoly hold on power. So far, we haven’t seen on a wide scale the sort of social dislocation to deter President Xi Jinping from his reform programme. The 8% minimum GDP growth once said needed to ensure social stability seems long forgotten.
Update: Michael Pettis postulates that the extent to which growth slows below 7.5% will be a proxy for the true pace of reform, absent an external shock that stops growth in its tracks; and argues that the days of even 7-8% GDP growth are also done.