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AP Photo/Dita Alangkara

China's economy is slowing down big time - here's what it means for everyone else

The country just posted its lowest growth in a quarter century.

CHINA’S ECONOMY, THE world’s second-largest, grew at its slowest pace in a quarter of a century last year, decelerating to expansion of 6.9%.

International financial markets have been hammered in recent months by worries over a slowing China, which has been the main driver of global growth.

Theses are some key points which explain China’s economic transformation and how it affects the rest of the world.

Why does it matter?

The days of isolation for the People’s Republic are long over. China is the world’s second-largest economy and its largest trader in goods.

From Australia to Zambia, via the European Union and United States, China’s influence on other economies is pronounced, whether through the prices of commodities such as iron ore, oil, and copper, or through rising consumer demand for luxury and consumer goods from foreign companies.

Retail investors can also feel the effects. The markets in Shanghai and Shenzhen have been in varying degrees of turmoil since a debt-fuelled bubble burst in June, but worries over the economy have also fuelled sell-offs in overseas stock markets in recent weeks.

China Financial Markets Andy Wong Andy Wong

Are the latest figures good or bad? 

China has already served notice of a “new normal” of slower expansion as it seeks more sustainable growth, supported by domestic consumer spending rather than cheap exports and massive government investment.

So to the government, 2015 was a year of “moderate but stable” development in line with the annual target of around seven percent.

Such rates would be the envy of developed economies in North America or Europe, and the figures matched market expectations.

But after decades of rapid Chinese growth, often with double-digit annual GDP increases, which helped the world navigate both the 2008 global financial crisis and the earlier Asian financial crisis, a quarter-century slowdown is a worrisome sign.

Stock Market-Rocky Start Associated Press Associated Press

Why has growth slowed?

Analysts point to a multitude of reasons: a weaker external environment which caused Chinese exports to drop last year and a limping property market, a key source of revenue for the government.

More alarming in recent months, a stock market collapse which caused the financial sector to contribute less to the economy, and a weakening currency which has seen capital storm out of the country.

Chinese officials say the Asian country is willing to accept slower growth as part of the cost of carrying out deep structural changes. For the first time, services made up more than half of GDP in 2015.

But analysts fear the current environment has actually caused much-needed economic reforms to halt, delaying policies needed to sustain China’s development in the long term.

China Economy Associated Press Associated Press

Are China’s economic figures reliable? 

When Wang Baoan, the chief of China’s National Bureau of Statistics, was asked the question as the data was released today, he answered: “The GDP data we publish is true and trustworthy.”

But even Premier Li Keqiang has previously expressed doubts about man-made data, and many analysts take Wang’s assurance with a grain of salt.

As well as political pressure, they point to the frequent revision of prior quarters’ data, which can change comparison bases, and the speed with which China produces its figures, less than three weeks after the end of the calendar year.

Some estimate the real growth rate is significantly lower than official statistics. Capital Economics said that its own measures pointed to Q4 growth of just 4.5%, but its economist Julian Evans-Pritchard said in a note that the economy was nonetheless “broadly stable”.

South Korea Japan China Summit Chinese Premeir Li Keqiang Lee Jin-man Lee Jin-man

What will the government do now?

Beijing wants to keep growth steady and stable, while shifting the economy away from its traditional dependence on exports and infrastructure spending. This is easier said than done.

Analysts anticipate that Beijing will further loosen monetary policy this year to fight deflation, with the weak growth figures spurring expectations.

But the government’s bungled handling of a volatile stock market and yuan devaluation have called into question its ability to steer China safely through a tough transition.

This year’s big challenges include: how to handle a massive oversupply of property and rein in continued overproduction in heavy industries, many of them still state-owned, that dominate much of the economy.

© – AFP 2016.

READ: North Korea says it could ‘wipe out’ America if it wanted to >

READ: One bank is telling investors to ‘sell everything’ as stock markets tank >

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    Mute Conn Rogers
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    May 28th 2015, 12:44 PM

    Expected battery life: 4 minutes

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    Mute Deco James Connolly
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    May 28th 2015, 1:14 PM

    That long ! Sign me up.

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    Mute MadMax
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    May 28th 2015, 2:37 PM

    About she same time as my iPhone then

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    Mute Ciaran Farrell
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    May 28th 2015, 12:44 PM

    Any chance they could just develop stronger batteries for smartphones.

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    Mute IrishGravyTrain
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    May 28th 2015, 2:02 PM

    Why would they do that. They need that battery to run its course after a couple of years to sell you a new phone.

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    Mute The Descolada
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    May 28th 2015, 12:48 PM

    Bet the japanese are already figuring out how to use it with porn

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    Mute IrishGravyTrain
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    May 28th 2015, 2:03 PM

    Japanese. Be one of the first things most men anywhere in the world would do.

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    Mute stewie
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    May 28th 2015, 1:39 PM

    it feels like only yesterday that having Snake or Tetris on your phone was the height of technology.Im getting old.

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    Mute John Reese
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    May 28th 2015, 1:38 PM

    Battery life is THE issue on phones these days. The man or company that comes up with a solution will be rich.

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    Mute Ciaran Farrell
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    May 28th 2015, 1:53 PM

    The Duracell Bunny has been strangely quiet this last while. Must be hard at work in R&D

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    Mute Raymond Power
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    May 28th 2015, 1:41 PM

    Seems the sci fi movies of 30 years ago are truly upon us.

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    Mute Matthew Donoghue
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    May 28th 2015, 3:10 PM

    Where’s all the hoverboards???

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    Mute Ciaran Farrell
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    May 28th 2015, 6:18 PM
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    Mute JustAoife
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    May 28th 2015, 12:41 PM

    That was (falsely) leaked as a feature of the iPhone 5 a couple of years back. Thought it was just as pointless then as it is now

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    Mute JustAoife
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    May 28th 2015, 3:08 PM
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    Mute Deborah Behan
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    May 28th 2015, 12:59 PM

    WANT!!!!

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    Mute Ciaran Farrell
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    May 28th 2015, 1:10 PM

    Deborah.. The phone or Pontious’ suggestion?

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    Mute Deborah Behan
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    May 28th 2015, 9:24 PM

    Eaney meaney miney mo!!

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    Mute John Doyle
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    May 28th 2015, 1:17 PM

    Probably be full of bloatware. Click Advert to use keyboard or something stupid like that.

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    Mute Shakka1244
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    May 28th 2015, 3:19 PM

    I’m guessing you’re a “glass half empty” type of guy. Am I right?

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    Mute Adrian Bollard
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    May 28th 2015, 4:56 PM

    The future is nigh…

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    Mute Aaron Brady
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    May 28th 2015, 3:33 PM

    Looks good, but lenovo are stuck on mid range phones, screen doesn’t look anywhere near a 5 inch, also doesn’t even look like it’s 1080o

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    Mute Pete Gibson
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    May 28th 2015, 10:45 PM

    Re: The usage of “cause” here.
    When the word “because” is abbreviated it is normally spelt as ‘cos.
    (This is ‘cos the words because and cause have completely different meanings)

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    Mute SCO Electrical
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    May 28th 2015, 6:42 PM

    Class

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    Mute Sam McCormack
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    May 28th 2015, 11:19 PM

    Like the HP Sprout then.

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