by Kevin Yao and Gabriel Crossley
BEIJING, Jan 17 (Reuters) – China’s economy grew faster than expected in the fourth quarter of 2021, but at its slowest pace in a year and a half, as the People’s Bank of China (PBOC) slashed interest rates to cushion the slowdown in the world’s second largest economy.
China is facing headwinds from regulatory policies, a declining real estate sector and resurgences of the coronavirus outbreak.
China’s gross domestic product (GDP) rose 4.0 percent year on year in the October-December period, compared with a 4.9 percent rise in the previous quarter, data released by the National Bureau of Statistics showed on Monday. Statistics (SNB). Analysts polled by Reuters had expected growth of 3.6%.
China’s economy grew 8.1% in 2021, well above the government’s “over 6%” target. Analysts polled by Reuters had expected an 8.0% rise. In 2020, GDP had grown by 2.2% in the final reading.
On a quarterly basis, the Chinese economy grew by 1.6% over the October-December period, against +0.7% in final reading in the previous quarter, while the consensus was +1.1%.
The Chinese economy got off to a flying start in 2021, recovering from the disastrous impact of the health crisis, before seeing its rebound weaken due to the decline in the real estate sector, the limitation of debt and restrictions related to the coronavirus epidemic.
Chinese leaders have pledged to further support the economy, which will face multiple headwinds in 2022.
China’s central bank on Monday unexpectedly cut borrowing costs for its medium-term loans for the first time since April 2020, leading some analysts to expect policy easing this year to cushion an economic slowdown.
“Economic momentum remains weak amid epidemic resurgences and difficulties in the real estate sector. As a result, we anticipate a further 20 basis point cut in PBC policy rates in the first half of this year. “, said analysts at Capital Economics in a note.
Retail sales disappointed, with an annual increase of 1.7%, their slowest pace since August 2020. Analysts had expected a rise of 3.7% after a 3 .9% in November.
Several Chinese cities have raised their COVID-19 alert levels ahead of the Lunar New Year, as the Omicron variant spreads to many regions.
Industrial production increased by 4.3% in December, against 3.8% the previous month. Analysts had expected a 3.6% rise.
Investments in fixed assets increased by 4.9% in 2021, against an increase of 5.2% over the first 11 months of the year, while the consensus was +4.8%.
(With Stella Qiu and Liangping Gao; French version Camille Raynaud)