China seen posting weakest annual growth in 24 years, will spur more stimulus

Mon Jan 19, 2015 4:10pm EST
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By Kevin Yao

BEIJING (Reuters) - China is likely to post its weakest growth since the global financial crisis in the fourth quarter as its property market cooled, reinforcing expectations the government will have to roll out more stimulus measures to avoid a sharper slowdown.

Data on Tuesday is expected to show the world's second-largest economy grew 7.2 percent in the October-December quarter from a year earlier, slowing from 7.3 percent in the previous quarter, a Reuters poll showed.

That would be its weakest performance since the first quarter of 2009, when the growth rate tumbled to 6.6 percent and a sudden collapse in world trade threw some 20 million Chinese out of work.

Full-year economic growth in 2014 is almost certain to undershoot the government's target of 7.5 percent and mark the weakest expansion in 24 years, adding to concerns about shaky global demand.

With the property market likely to remain under pressure and investment sluggish, many market watchers expect Beijing to cut its growth target for 2015 to around 7 percent.

Some analysts say even that may be a stretch, and more stimulus measures are widely expected, especially as the economy faces persistent deflationary pressure - evident by falling factory prices that have eroded corporate earnings.

The central bank, which cut interest rates in November for the first time in more than two years, is expected to cut rates again or lower reserve requirement ratios (RRR) for all banks, or both, although it may be worried that faster policy loosening could lead to speculation in financial and property markets.

"We expect monetary policy loosening in 2015, with 50 basis points cuts in interest rates and 100 bps cuts in RRR," said Zhu Jianfang, chief economist at CITIC Securities in Beijing.   Continued...

Labourers work at a construction site for a new building in Beijing December 17, 2014.  REUTERS/Kim Kyung-Hoon