China's economy grows 6.7 percent in 2016

Tourists at a shopping center in Sanya, China, in September. Photo: The New York Times

China's economy grew by 6.7 percent in 2016, compared with 6.9 percent a year earlier, marking its slowest growth in more than a quarter of a century.

The result came after a weak start last year, when China's currency and stock market were tumbling and many foreign investors fretted that the country's three decades of robust economic expansion might be ending.

China's growth is a key driver of the global economy and a major concern for investors around the world.

The figure is in line with Beijing's official growth target of between 6.5 percent and 7 percent.

The Chinese government appears to have delayed an economic reckoning, but at a high cost. The central bank and state-owned banks shoveled trillions of renminbi into a surge of credit, putting aside longstanding worries about a deeply indebted corporate sector and signs of a real estate bubble.

Many concerns have been raised about the quality of Chinese economic data. Western economists have suggested that Chinese government statisticians underestimate growth in boom years and overestimate growth during busts to present a smoother overall picture of the Chinese economy. Worries about data quality increased after the governor of the northeastern Liaoning province said this week that the province had overstated growth for several years.

But many economists say that last year's growth appears to have been real — although bringing additional debt that could burden the economy for years to come.

The national GDP data is reliable, Ning Jizhe, vice chairman of National Development and Reform Commission and National Bureau of Statistics Commissioner, said at a press conference in Beijing on Friday.

He noted that regional authorities who were found to falsify economic figures would be punished in accordance with laws and regulations.

China's GDP in 2016 maintained "a medium and high-speed growth", thanks to government efforts in restructuring the economy, said Ning. The industrial structure was optimized. In 2016, tertiary industry accounted for 51.6 percent of GDP, up 1.4 points from the previous year, NBS data showed.

Investment in real estate was a notable strong point in China last year, growing 6.9 percent year-on-year to 10.26 trillion yuan. The growth rate registered in 2015 was 1 percent.

Analysts said the real estate sector may not be a prominent contributor to the economy this year as local governments strive to curb speculation.

An expected drop in auto sales will be another drag on this year's economic growth, said Guo Lei, senior macroeconomist with GF Securities.

He predicted that auto sales in 2017 will fall 7-8 percent compared to the more than 13 percent of last year due to reduced incentives.

For the fourth quarter, the world's second biggest economy grew by 6.8 percent.

Beijing's aim to rebalance the economy towards domestic consumption has led to major challenges for large manufacturing sectors with layoffs, especially in heavily staffed state-run sectors such as the steel industry.

China was set to announce a lower economic growth target for 2017 to around 6.5 percent, from last year's range of 6.5 to 6.7 percent, Reuters reported, citing people familiar with the matter.

Helen Zhu, head of China equities at Blackrock, said that she expected the economy would decelerate this year, but she didn't consider that a problem.

"A few years ago, the market would have been very worried about this and thinking it was a very negative thing. I think throughout time, people have seen that structural reforms and the quality of growth is much more important than just the pure quantity of growth," she said.

Other analysts have pointed toward the recovery on China.

"Growth momentum in China has actually improved a little bit in the second half of the year, led by the improvement in the industrial sectors and also the financial market recovery in year-on-year growth terms," Li Wei, a China economist at CBA, told CNBC's "The Rundown" on Friday before the data's release. "We think China's economy has entered this year, 2017, on a firmer footing."

But he noted that China's economic performance this year would depend on the global recovery, particularly whether China's exports pick up. He estimated that declining exports had shaved 0.5 percentage point from China's GDP growth in 2016. If exports to the EU and US recover, that would turn "flat," and China's 2017 economic growth could pick up to around 6.8 percent, Li said.

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