BEIJING—China’s economic growth beat economists’ estimates in the fourth quarter, putting it in line with the government’s full-year expansion targets.

Gross domestic product rose 7.3 percent in the three months ended December from a year earlier, the statistics bureau said, beating the median estimate of 7.2 percent in a Bloomberg survey of analysts. The economy expanded 7.4 percent in 2014, the slowest pace since 1990.

 

The central bank cut interest rates for the first time in two years in November and the government accelerated the approval of infrastructure projects to boost an economy mired in a property slump and overcapacity. Robust external demand fueled by the U.S. recovery has helped underpin growth as the economy transitions away from investment-led expansion.

 

“Another important factor bolstering growth is services,” Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd., said before Tuesday’s data release. “China will take two or three years to switch from an old economy led by the property sector to a new one driven by services, high-end manufacturing and high-tech.”

 

Industrial production rose 7.9 percent in December from a year earlier, compared with the 7.4 percent median estimate of analysts and November’s originally reported 7.2 percent. Retail sales increased 11.9 percent from a year earlier, compared with the 11.7 percent seen by economists.

 

Vito Xu, chairman and president of the Chinese shopping mall developer, Sasseur Group, said the short-mid term economic outlook is steady reduced growth. “China’s economic format is in a stage of transition. Normally during a transition we see slowing down or reductions – it’s a painful progress,” he said.

 

Xu added that the government’s anti-corruption campaign will continue to have an impact on the economy in the short-term but remained optimistic that this is a necessary step toward “healthier growth” in the future.

 

On the impact of the popularly dubbed “new normal” growth rate, Xu said, “Full price retail sectors, including department stores and shopping malls, are all dropping. The only two segments that are growing are outlet and online consumption. So China’s retail sector is also going through a stage of transition.”

 

Yves Wang, a Beijing-based senior research manager at market intelligence firm IDC, said that China’s transition from high speed growth at 8-12 percent, to high-medium speed growth 6-7 percent, is associated with a shift from an investment and export driven economic model to a consumption driven one.

 

“Development drivers [are moving away from] land, capital and demographic dividend growth to technology driven growth,” said Wang, adding that she predicts an improvement in people’s livelihood and consumption capability, as well as extension of China’s free trade zones and “one belt, one road” investment strategy, in the future.

 

The GDP figure comes one day after the Shanghai Stock Exchange tumbled nearly 8 percent on Monday, following the government’s efforts to crack down on the practice of buying stocks with borrowed money known as marginal trading.

 

The move translated into a drop of 7.7 percent drop for Shanghai’s SSE Composite Index, which landed at 3,116.35 —an abrupt about face for the market, which gained 53 percent last year.

 

“Much of the recent run up of the Shanghai Stock Exchange has been fueled by investors who have been taking out margin loans,” said Benjamin Cavender, a senior analyst at Shanghai-based China Market Research Group.  “In an effort to cool speculation, the CSRC [China Securities Regulatory Commission] restricted several key securities firms from lending to new clients and this is what has sparked the recent sell-off and drop in shares.”

 

When asked how retail markets are responding, Cavender said, “I think long-term we are going to see the Shanghai Exchange continue on its upward trajectory but in the near-term we may see quite a bit of volatility as retail investors re-evaluate whether or not they want to have money invested in stocks.”

 

Bloomberg contributed to this report.

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