China's economic growth rate stabilises

China's economy, the world's second-largest, has shown signs of stabilising, as 2013's growth rate matched that for 2012, official data suggested.

Gross domestic product (GDP) grew at an annual rate of 7.7% from October to December, down from 7.8% in the previous quarter.

But it was still higher than the government's target rate of 7.5%. China is trying to maintain strong growth while rebalancing its economy. China has said it wants to move away from an investment-led growth model to one driven by domestic consumption.

"It's very much within the range of what the government was aiming at," head of Beijing Bureau of Market News International, David Wilder said.

"The Chinese economy mustn't and can't grow at the double digit rates we're used to seeing. And in some regards slower growth is actually encouraging because it suggests that it's moving at a more sustainable pace," he said.

An economist with Shenyin and Wanguo Securities in Shanghai, Li Huiyong said, "We maintain our 2014 GDP growth forecast of 7.5% as we still need to be on guard for the risks from debt problems in the economy."

But some observers are sceptical about the latest figures. Investment director of UK equities at Standard Life Investments, Euan Stirling, said, "There's a broad belief that the growth rate is below that of the 7.7% published - it's probably nearer 4% or 5%."

Underlying economic activity levels, such as industrial production and power demand figures, suggest lower growth rates, he said.

A government-led investment boom has been a main factor driving China's growth in recent years. Chinese banks, especially the big four state-owned lenders, lent record amounts of money in the years after the global financial crisis in an attempt to sustain the country's high growth rate.

However, there have been concerns that part of that money has gone towards unproductive investments and that banks may not be able to recover those loans.

There have been concerns over the rising levels of bad debt at Chinese banks.

There are also concerns over the growth of shadow banking - lending by non-banking companies - in the country.

Critics have warned that shadow banking makes credit less transparent and poses a major risk to China's economic growth.

China has the challenge of trying to raise the productivity of a shrinking labour force who are working more in service sector jobs.

China is thought to be drafting rules calling for greater supervision and monitoring of shadow banks. Banks have been told to publish data on 12 key indicators, including off-balance-sheet assets, to enhance their transparency.

Chief China economist at Mizuho Securities in Hong Kong, Shen Jianguang said, "The government's moves to curb shadow banking and local government debt will cap the growth of investment."

BBC