Regions

China is Expected to Post its Worst Annual Economic Growth in 25 Years

January 19
7:21 AM 2016

Economists said the expansion of the Chinese economy was held back by sluggish domestic and external demand, weak investments, factory overcapacity and high property inventories, which exacerbated deflationary pressures in the economy.

Business Insider reported that China's annual fourth-quarter GDP likely slowed to 6.8 percent from 6.9 percent in the third quarter, the weakest reading since the global financial crisis, while full-year growth is seen at a 25-year low of 6.9 percent.

"The Chinese yuan has been caught up in a vicious circle than can but lead to further depreciation of the currency. Concern over the extent of the slowdown in Chinese growth risk fuelling capital outflows and in turn a further depreciation of yuan, to which the People's Bank of China seems resigned,"  Nordine Naam, an analyst at brokerage Natixis, said.

According to CNN Some economists have adjusted their estimates recently to reflect poor manufacturing data and turmoil in Chinese stock market that have sent uncertainty washing around the globe. At the heart of the rockiness is a drop in the value of the country's currency, the yuan.

In recent weeks, the central bank has attempted to guide the yuan lower against the U.S. dollar, a move that many analysts have interpreted as an effort to aid Chinese exporters and prop up weakening economic growth.

A China slowdown has global repercussions. The country rose quickly in recent decades as an industrial powerhouse, sucking in raw materials from around the world to build roads, bridges, factories and skyscrapers.

But with growth now on the wane, construction is faltering and demand for iron ore, copper, steel and lead is declining. Global commodities markets, and the countries that depend on them, are taking a big hit.

Daily Mail noted that at a meeting of G20 officials this week, China's top diplomat Yang Jiechi warned that "it is not possible to completely discard the possibility that an economic crisis could once again take place, and the problem should not be neglected."

Unexpected moves in the yuan exchange rate -- after a surprise devaluation in August -- have disturbed investors in recent weeks, who worry that the real picture is worse than portrayed and authorities are trying to boost the competitiveness of domestic manufacturers.

The Asian giant is a key driver of the world economy, affecting businesses and employment across the planet, and worries about its health have roiled global markets in recent weeks and months.

The figure would be the weakest growth in the People's Republic since the 3.8 percent of 1990, a year after the bloody Tiananmen Square crackdown rocked the country and isolated it internationally.

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