China’s growth slows but foundations in place for a stable recovery

But commentators said a year-end spurt supported by infrastructure spending and a jump in trade signalled the foundation for the stable growth path Beijing believes is vital for economic reform may be in sight.

Evidence of a burgeoning recovery in exports, stronger than expected industrial output and retail sales, together with robust fixed asset investment, all indicated that Beijing’s pro-growth policy mix has gained sufficient traction to underpin a revival without yet igniting inflationary risks.

Year-on-year growth of 7.9 per cent in the fourth quarter snapped a streak of seven consecutive quarters of slowdown.

The performance was at the upper end of the 7-8 per cent rate economists reckon is needed to deliver on reforms essential to China’s long-term development after three decades of red-hot, double-digit growth.

Full year growth of 7.8 per cent was the weakest since 1999, comfortably ahead of the government’s 7.5 per cent target, which just months ago seemed to some economists to be in jeop- ardy.

Market reaction was generally upbeat, with Asian shares advancing and platinum and palladium following suit, while oil traders took the opportunity of data confirming the recovery to book profits after two sessions of steep rises.

China’s new leaders must stabilise the economy this year in order to keep employment high while avoiding a surge in housing prices as well as inflation that could undermine reforms needed to overhaul the country’s export-oriented growth mod- el.