BEIJING -- Economic activity in China is clearly losing steam as the real estate market cools, and the slower growth in the world's second-largest economy is taking a toll on the rest of Asia and the world.
China's real gross domestic product grew 7.4% in 2014, the lowest figure in 24 years, according to data released Tuesday by the country's National Bureau of Statistics. The government led by President Xi Jinping aims to maintain stable growth of about 7% by gradually slowing economic expansion while pressing ahead with structural reforms.
The country's nominal GDP surpassed 63 trillion yuan ($10 trillion) in 2014. This is more than double the roughly 490 trillion yen ($4.12 trillion) of Japan, which China surpassed in 2010, and almost 60% that of the U.S. China will become the world's largest economy by the mid-2020s, predicts Toru Nishihama at the Dai-ichi Life Research Institute.
Some indicators say that China is already the biggest economic power. China accounted for more than 16% of the global economy in 2014, exceeding the U.S., on the basis of purchasing power parity, according to estimates by the International Monetary Fund.
China's GDP growth has been decelerating as the economy becomes bigger. The economy grew 7.7% in both 2012 and 2013, below the 8% mark for two straight years, and fell short of the government's target of 7.5% last year.
The IMF on Tuesday lowered its forecast for global economic growth by 0.3 percentage point to 3.5% for 2015. The downgrade is largely attributed to economic slumps in the relatively large economies of China, Japan and the eurozone. The projection for China was lowered by 0.3 point to 6.8%.
Chinese efforts to conduct structural reforms are welcomed, said Olivier Blanchard, the IMF's director of research, in a news conference in Beijing. But he added that China's economic slowdown will hurt the country's trading partners in Asia.
The weakness in China last year was clearly caused by the real estate market slump. Investment in real estate development, which accounts for roughly 15% of GDP, climbed 10.5% in 2014, about half the growth marked in the previous year. A drop in housing prices nationwide had a negative impact on investment and production. The increase in power consumption, an accurate indicator of economic activity, slowed by roughly half from a year earlier to 3.8% last year.
The slide in Chinese domestic demand is having an effect on the rest of the world, mainly Asia. China exported 10.17 million tons of steel in December, a monthly record and up about 90% on the year. Steel exports for all of 2014 rose by 50% in volume terms but just 33% by value.
China's excess crude steel output capacity totals 300 million tons, or triple Japan's production. China is increasingly selling the domestic market's surplus steel at cheap prices abroad. This "steel deflation" triggered by China has forced a midsize South Korean steelmaker to suspend electric furnace operations. And falling iron ore prices are seen causing major mining nation Australia's fiscal deficit to worsen more than expected.
Meanwhile, China is snapping up resources to try to take advantage of the drop in prices, with its crude oil imports growing about 10% in volume terms in 2014. Cheaper crude is a tailwind for China, which relies on imports for roughly 60% of its consumption. But as China is believed to be stockpiling a substantial amount, it's uncertain whether the country will drive a recovery in demand, as resource-producing nations hope.