BEIJING (Reuters) - China's economy grew faster than expected in the fourth quarter, although tighter credit at home and weak export markets still weighed, dragging annual growth in gross domestic product to 8.9 percent in the fourth quarter, its weakest pace in 2-1/2 years.
-- Q4 GDP grew 8.9 pct yr/yr (f'cast 8.7 pct; Q3 9.1 pct)
-- Dec factory output +12.8 yr/yr (f'cast +12.2 pct)
-- Dec retail sales +18.1 pct yr/yr (f'cast +17.2 pct)
-- Jan-Dec FAI +23.8 pct yr/yr (f'cast +24.1 pct)
"What's happened in December is to some extent the pre-Lunar New Year bounce in activity and prices. What we're seeing in December is the seasonal effect. If it is just a seasonal effect then obviously what that means is January-February will be weaker.
"It's fair to say the economy is holding up better but it's hard to say if that's just a statistical artifact of the short calendar.
"Credit growth was 750 billion in December, which was a little on the low side, in our view. Policy makers talk about having room to ease, but we don't see them doing that at the moment."
"The headline number is better than expected, but if you look at the detail, there are still a lot of areas for concern.
"The property slowdown has gathered speed and property investment growth slowed sharply to only 12 percent year-on-year in December. New property starts slowed all the way to only 0.9 percent year-on-year. It indicates that in Q1 2012 the numbers will be very unpleasant. Policy easing will continue."
"The slowdown has been orderly. Consumption, retail sales continue to be strong. Overall growth momentum continues to be strong. The slowdown is not scary, so we are not going to get massive policy easing. There will be no interest rate cuts. We expect four more RRR cuts at 50 basis points each."
"These numbers do not portray an economy heading for a hard landing, although the rapid slowdown in fixed-asset investment points to weakness in a key driver of GDP.
"For all of 2011, spending jumped 23.8 percent, but that means it almost completely evaporated in December given the steep slowdown from an average of 24.5 percent in the first 11 months of the year. The market had looked for a dip to 24.1 percent.
"But this can be reversed relatively easily, by easing the crunch on credit from sky-high reserve requirements and lending curbs, and IFR expects another cut in the SRR in short order.
"Meanwhile, more broadly speaking and helped by sluggish external demand, the economy is coming back to earth after exceptionally strong growth in 2010 and early 2011, with GDP expected to expand by around the government's perennial 8 percent target in 2012."
HUA ZHONGWEI, ANALYST WITH HUACHUANG SECURITIES IN BEIJING:
"The slowdown is quite modest, and the overall situation of the Chinese economy is stable.
"It's almost certain now that China's economic growth will touch a cyclical bottom in the first quarter of 2012 before rebounding in the second quarter.
"According to our field studies, demand for heavy equipment and machinery is recovering, and that is a very good sign for the economy."
For details, see the website of the National Bureau of Statistics at www.nbs.gov.cn There may be a delay before it publishes a report on its website.
-- The Shanghai stock market weakened marginally on the news. The yuan strengthened to 6.315 to the dollar compared with 6.316
-- Falling exports and tight domestic monetary policy have dragged China's economy into its worst slowdown since the second quarter of 2009.
-- To bolster economic growth, China lowered banks' reserve requirements for the first time in three years in November by 50 basis points and analysts expect another 200 basis points worth of cuts this year.
-- A Reuters poll in October showed economists expect China's economy, the world's second largest, to grow 8.6 percent this year.
-- The last time China's annual GDP growth fell below 8 percent was in 2001 when the Sept 11 attacks dragged quarterly economic growth to a low of 7 percent.
Reporting by China Economics Team; Editing by Ken Wills