China records slowest growth in economy in 24 years

China’s economy grew at its slowest pace in 24 years in 2014 as property prices cooled and companies and local governments struggled under heavy debt burdens, keeping pressure on Beijing to take aggressive steps to avoid a sharper downturn.

European and Asian shares in fact rose on relief that the news was not worse; the Shanghai Composite index gained 1.85%, Japan’s Nikkei 225 index saw its biggest one-day gain in a month and European markets rallied.

But for investors worried about growth in China and the world this year, the data poses two questions: Will the soft numbers and expectations of further weakness force the central bank to pump hundreds of billions of dollars into banks system-wide to prop up growth? And if so, what does that mean for Beijing’s attempts to reform its economy?

The world’s second-largest economy grew 7.4% in 2014, official data showed yesterday, barely missing its official 7.5% target but still the slowest since 1990, when it was hit by sanctions in the wake of the Tiananmen Square crackdown. It expanded 7.7% in 2013. Fourth-quarter growth held steady at 7.3% from a year earlier, slightly better than expectations.

Few had expected China to meet its 7.5% full-year target, but the performance was better than some had feared after a rough few months raised concerns the economy may be heading for a hard landing.

“The country’s period of miraculous break-neck growth is over, but let’s get over it,” said a commentary on the official Xinhua news service, referring to a long string of double-digit expansion. The end of the high-speed growth era does not spell an end for China’s economy.”

Modest support measures from the government over the year helped stave off a more dramatic slowdown, while Beijing’s tolerance of somewhat slower growth sent a message that reform remains a priority. “This is the best possible miss you could have from a messaging standpoint,” said Andrew Polk, economist at theConference Board in Beijing. “The government is saying, ‘we’re not married to this specific target, we missed it and we’re okay.’ That seems to me a quite positive development.”

Still, a further slowdown in China could hinder the chances of a revival in global growth in 2015, given the major role it plays, in particular for commodities and high-tech. Indeed, Polk said the GDP figure was difficult to square with other negative signs.

China’s property market — a major driver of demand across a range of industries — has proven stubbornly unresponsive to policy support, and lending data from the banking system shows both enduring weakness and a resurgence in the shadow banking system, which Beijing has been struggling to rein in.

Policymakers also are concerned about the potential onset of a deflationary cycle, aggravated by plummeting energy prices, industrial overcapacity and sluggish demand.