China’s GDP growth rate of 7.4% in 2014 certainly assuaged a few fears about a hard landing.
But 7.4% is below the Government in Beijings official target for the year and the the quarter on quarter growth rate of just 1.5%, a big fall from the 1.9% rate in Q3 and lower than the 1.7% expected, highlighted the deterioration in the strength of the Chinese economy.
Indeed it is worth noting that the last time that Chinese data was weaker than the 7.4% anual rate of GDP growth in 2014 was in 1990 when the economy printed a paltry 3.8%.
Of course the economy back in 1990 was much smaller than it is now and there are limits to how fast an enormous economy of more than 10 Trillion US dollars can grow but there is no doubt that Chinese growth is slowing.
Not only is annual growth at a 24 year of 7.4% low but the rolling 5 and 3 year growth rates of GDP have fallen to 8.5% and 7.6% respectively.
The slowdown is important for a global economy facing increased deflationary forces and the Australian economy still trying to grow itself away from an over reliance on the mining boom.
Indeed Annette Beacher, TD Securities Head of Asia pacific Research in a note this afternoon highlights that, “the IMF has just announced a 6.8% forecast for Chinese GDP for 2015, below consensus and TD view for 7%. This downgrade is somewhat aggressive for the IMF as in recent years it was reluctant to even acknowledge that GDP growth in China would be less than 8% in 2014.”
It seems that today’s data is just another piece of the puzzle suggesting 2015 is going to be an interesting and challenging year for markets.