China posts 6.7% growth in 2016, lowest in 26 years

The economic growth rate in China only came to 6.7 percent last year, the lowest in 26 years. This is evidence that the Chinese economy has ended the phase of rapid growth (maintaining a growth rate of 7 percent)’ and entered a phase of moderate to slow growth.

China’s state statistics bureau announced on Friday that the world’s second largest economy saw its GDP expand 6.7 percent in 2016 from the previous year, and thus achieved the goal of 6.5 percent to 7 percent-range growth. Last year’s growth rate was thus the lowest since 1990 when the Chinese economy posted 3.9 percent growth. China’s GDP gained 6.8 percent in the fourth quarter of 2016 year-on-year, as the Chinese economy outperformed in the last quarter than during the first to third quarters when it recorded 6.7 percent growth each.

Analysts say chances are high that China will announce its annual growth target for this year of about 6.5 percent. Notably, watchers say that China’s economic growth will slow further due to trade dispute with the U.S. after the inauguration of President Donald Trump. Some analysts suggested that if ‘imposing 45 percent tariffs on Chinese imports’ that Trump publicly vowed actually materializes, the measure will cut China’s economic growth rate by 3 percentage points.

Analysts say that while economic growth that Beijing managed to sustain through real estate bubble last year is not sustainable, three hikes in the U.S. benchmark interest rate that are planned this year will accelerate the outflow of foreign currency from China, which will also negatively affect the galvanization of domestic consumption in the world’s most populous country. Experts say that China has ended the ‘era of maintaining 7 percent annual growth,’ and entered a phase to maintain growth rate at the 6 percent level.

Some experts are raising concern that Korea, which has China as No. 1 trade partner (with export dependence on China amounting to 26 percent in 2015), could be more widely affected if the Chinese economy enters the phase of moderate to slow growth in earnest, and Seoul’s dispute with Beijing over Terminal High Altitude Area Defense (THAAD) intensifies. According to the Korea International Trade Association, Korea’s export to China declined 7.7 percent year-on-year last year, as its shipment slumped for two consecutive years.

Ja-Ryong Koo bonhong@donga.com