As the National Statistics Office announced today, the Chinese economy grew by 8.9% on a year earlier in the fourth quarter 2011. This is the weakest quarterly figure since the second quarter 2009. Over the year as a whole gross domestic product rose by 9.2%, after 10.4% in 2010.
The slowdown in growth evident since mid-2010 was initially primarily the result of a conscious attempt by policymakers to curb business activity, with the aim of countering overheating symptoms in various sectors of the economy, such as real estate for example. Since the middle of last year the world’s second largest economy has also been increasingly feeling the impact of the slowdown in global growth, in particular the economic repercussions of the eurozone sovereign debt crisis. The pickup in world trade that we expect to see in the course of 2012 will also provide a fillip to the Chinese economy, with real gross domestic product growth likely to edge up again slightly. We expect to see average GDP growth of 8.5% in 2012. That would be the weakest increase since 2001.
Against the backdrop of the Chinese government’s drive to rejig the hitherto heavily export-geared growth model, and with economic development in the industrial countries set to be on the subdued side in the years ahead, we also expect medium-term growth in the Chinese economy to be in the region of 8 to 8.5% a year. The current fairly weak growth by Chinese standards is therefore unlikely to be an exception but rather represents China’s new normal as far as growth dynamics are concerned. However, that is not bad news for the world economy. China will continue to provide a considerable boost to the world economy and, at the same time, global imbalances are likely to decline thanks to the rising importance of China’s domestic economy.