BY Richard Summerfield
As the world’s pre-eminent emerging market, China has been at the forefront of global economic development. It has played a pivotal role in helping to drive growth internationally over the course of the last decade; however, the days of blockbuster expansions appear to be at an end.
Against a backdrop of substantial capital flight, gradually crashing stocks and a sliding yuan, the Chinese economy endured a tumultuous 2015.
News that China's annual gross domestic product growth dropped to 6.9 percent last year, from 7.3 percent in 2014, has only increased concerns around the health of the world’s second largest economy.
Growth in the fourth quarter of 2015 fell to just 6.8 percent. Steel output fell 2.3 percent to 802.8m tonnes, while power generation fell by 0.2 percent. Coal production dropped for the second consecutive year. These declining numbers combined to see China record its lowest period of growth since 1990, according official statistics released on Tuesday.
The data comes during a period of great uncertainty around the Chinese economy, which has had an enormous effect on global markets. However, China’s markets largely cheered the country’s latest GDP figures, noting they were in line with predictions.
While many western economies would welcome news of 6.9 percent GDP growth, for China it represents a backwards step, albeit not a surprising one. The economy has been beset with issues over the last 12 to 18 months. Weakening exports, slowing investment and an overcapacity of both housing stock and factory space have all had a detrimental effect.
All this piles more misery on the Chinese government, which is attempting to reform the nation’s economy. Beijing intends to transition away from a centrally planned, manufacturing economy, embracing a somewhat market driven model more dependent on services and consumption. But this transition looks set to be a painful one.
There are also question marks over the reliability of the data released by the Chinese government,with some analysts suggesting that things may be far worse than Beijing is willing to admit.
To counter the slowdown, Chinese officials have said the government is looking to increase deficit spending in 2016 to generate growth.