Beijing: China on Monday lowered last year's economic growth figure to 7.3 percent after concerns about slowing expansion caused global market havoc, but said its own stock exchanges are stabilising following "bubbles" and painful corrections. The new number remains the lowest since 1990, when growth plummeted to 3.9 percent. Global stock markets have been pummelled by concerns over slowing growth in the nation, a key driver of the world economy.
The National Bureau of Statistics said on its website it reduced the gross domestic product (GDP) growth figure from the 7.4 per cent announced in January after a "preliminary confirmation". A final confirmation could come in January 2016, it added. After decades of double-digit expansion, authorities are trying to pull off a tricky rebalancing -- from an investment- and export-led economic model to one where domestic consumer demand drives slower but more sustainable growth. Finance minister Lou Jiwei told a G20 meeting of finance ministers and central bank governors in Ankara at the weekend that the economy had entered a "new normal".
Growth was "expected to remain at around seven percent and the situation may sustain for four to five years", he said. Chinese growth slowed in the first two quarters of this year, reaching 7.0 percent in both periods. Nomura International analyst Wendy Chen said Monday's GDP correction was largely related to service sectors, which were key to the overall transition but had lower growth than earlier figures showed. "This means China's economic structure did not improve as well as expected",. At the same time Chinese stocks have plummeted nearly 40 per cent since mid-June, after soaring more than 150 percent in the previous 12 months in a spectacular debt-fuelled rally encouraged by authorities. Official interventions costing hundreds of billions of dollars failed to stop the declines, the country's worst market rout in almost two decades.
The central bank governor and market regulator admitted at the weekend that there had been "bubbles" on the exchanges, but said the turmoil was almost over. "Bubbles continued to build up until mid-June," People's Bank of China (PBoC) Governor Zhou Xiaochuan said at the meeting in Ankara, according to a statement on the PBoC website. "The correction in the stock market has now come close to an end," Zhou said, refraining from using the word "burst" and adding the Chinese economy was not "much affected" by the rout.
'Risks and bubbles'
The National Development and Reform Commission, China's top economic planning agency, played down growth concerns, saying electricity consumption and railway cargo transport -- two of the indicators Chinese Premier Li Keqiang reportedly refers to when gauging the health of the economy -- improved in August.
Property prices and transaction volumes also rose, it said in a statement Monday, predicting the economy was "able to achieve the full-year expansion target" of around seven percent. China last month reduced interest rates for the fifth time since November and cut the amount of money banks must hold in reserve, to try to bolster its economy and restore market confidence. Data showing an official gauge of Chinese manufacturing at a three-year low sent world markets into a tailspin last week, as investors gave vent to worries the economy is headed for a "hard landing". Investors have also been alarmed by the authorities' surprise move last month, lowering the yuan currency's central rate against the US dollar by nearly five percent in a single week. The Shanghai bourse ended the morning session in positive territory on Monday, up 0.87 percent or 27.65 points at 3,187.82, although it trimmed earlier gains following the GDP announcement.
"The GDP figure correction for last year has little impact on the market," Shenwan Hongyuan Group analyst Qian Qimin told AFP. "It was the figure for last year and everyone knows the economy is not good anyway." The market regulator, the China Securities Regulatory Commission (CSRC) sought to reassure investors, even as it echoed Zhou's comments. The gains "had been too rapid and large, forming stock market bubbles, therefore subsequent plunges and adjustments were inevitable", it said in a statement, adding the "risks and bubbles have been released to some extent".
Analysts estimate the Chinese government has spent hundreds of billions of dollars to try to prop up stock prices, including funding state-backed China Securities Finance Corp. to buy shares. Investors fear it will cut back its interventions -- even though these have raised questions over its ability to manage the economy and its commitment to reforms. But the CSRC said the government "will absolutely not sit back" if "fierce and abnormal volatilities take place in the stock market and may trigger systemic risks". "We will take decisive and multiple measures to stabilise the market in a timely manner."
