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This week's China market update, courtesy of Alicia Smith

Today’s publication of China’s GDP data for 2014 marks the country’s slowest growth in two decades; however, the reported figure of 7.4%—still the fastest of any big economy—is hardly cause for concern. Slightly slower growth is part of the government’s plan for steering the economy onto a more sustainable path as it concentrates on structural reforms such as creating a social safety net.

The healthy GDP figure has, for now, assuaged investors’ fears about the Chinese stockmarket, which plunged by 7.7% on Monday, after the country’s securities regulator curbed margin trading, banning three large broker firms from opening new margin accounts. The fall, which was the largest in 6 years, was a long-overdue correction after a soaring rally that had little to do with economic fundamentals.

Data also shows that conventional banks have surpassed shadow lenders as the main source of funding for companies.  Banks had dominated China’s financial system until five years ago when loosely regulated non-bank institutions, colloquially known as “shadow banks,” rose up in response to rules that were intended to rein in breakneck credit growth.  In 2013 half of all new lending in China came from the shadows.  Worried about the growing risks, officials cracked down on the non-bank institutions early last year. This weeks’ figures reveal that traditional banks issued about three-quarters of all credit in the second half of 2014.

Foreign companies are now allowed to fully own telecommunications companies within China’s Shanghai free trade zone, according to Chinese news agency Xinhua:

China consumed 5.52 trillion kWh in 2014, a 3.8% increase over 2013, according to the country’s National Energy Administration. Growth in power use has slowed considerably.  Consumption rose 7.5% in 2013. 

China’s investment in transmission and distribution has continued to grow at a rapid pace.  Investments transmission and distribution by State Grid Corporation topped $54 billion in 2014, an increase in 14.1% over 2013.  Investments this year are expected to reach $68 billion, an increase of 24% over 2014 according to disclosures that were made at the recent SGCC Annual Working Conference in Beijing. 

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