BEIJING- China’s economy rebounded in 2021 with its best growth in a decade, helped by robust exports, but there are signs that momentum is slowing on weakening consumption and a property downturn, pointing to the need for more policy support.
Growth in the fourth quarter hit a one-and-a-half-year low, government data showed on Monday shortly after the central bank moved to prop up the economy with a cut to a key lending rate for the first time since early 2020.
The world’s second-largest economy is struggling with a rapidly cooling property sector, as well as sporadic small-scale COVID-19 outbreaks that could deal a blow to its factories and supply chains.
Several Chinese cities went on high alert ahead of the Lunar New Year holiday travel season, as the Omicron variant reached more areas including the capital Beijing.
The economy grew 8.1 percent last year – its best expansion since 2011 – and faster than a forecast 8.0 percent. The pace was well above a government target of “above 6 percent” and 2020’s revised growth of 2.2 percent. The economy recorded its weakest growth in 44 years in 2020 but staged a faster recovery than other major economies.
Gross domestic product grew 4.0 percent in the final quarter, National Bureau of Statistics (NBS) data showed, faster than expected but still its weakest pace since the second quarter of 2020. Growth was 4.9 percent in the third quarter.
“At present, the downward pressure on China’s economy is still relatively big, and growth of residents’ employment and income is restricted,” Ning Jizhe, head of the NBS, told a news conference.
On a quarter-on-quarter basis, GDP rose 1.6 percent in October-December, compared with expectations for a 1.1 percent rise and a revised 0.7 percent gain in the previous quarter.
China’s economy got off to a strong start in 2021 but economists expect growth to slow in the coming months.
The central bank unexpectedly cut the borrowing costs of its medium-term loans for the first time since April 2020, leading some analysts to expect more policy easing this year to guard against developers’ mounting risk of defaults.
The People’s Bank of China said it was lowering the interest rate on 700 billion yuan ($110.2 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85 percent. It also cut the 7-day reverse repo rate.
“Economic momentum remains weak amid repeated virus outbreaks and a struggling property sector. As such, we anticipate another 20 bps of cuts to PBOC policy rates during the first half of this year,” said analysts at Capital Economics, in a note.
But Nomura said in a note the space left for future rate cuts this year was small: “We expect another 10 bp rate cut before mid-2022.”
Global share markets were choppy on Monday and benchmark Dalian and Singapore iron ore futures fell after signs of continuing economic weakness in top steel producer China.
