Last updated: March 17. 2013 3:00AM - 209 Views
By JOE McDONALD, AP Business Writer

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BEIJING — China's economy is finally rebounding from its deepest slump since the 2008 global crisis but the shaky recovery could be vulnerable to a new downturn in global trade.

Growth rose to 7.9 percent in the three months ending in December, up from the previous quarter's 7.4 percent data showed Friday. For the year, the economy grew by 7.8 percent, which was China's weakest annual performance since the 1990s.

Retail spending and factory output rose, but analysts say China could suffer a setback if exports weaken or the government fails to maintain investment spending that is propping up a recovery.

The rebound by itself looks quite shaky, said IHS Global Insight analyst Xianfang Ren in a report. While domestic demand looks to be coming back, it looks to be a rather anemic rebound.

Forecasters expected a rebound in early 2012 but pushed that back after demand for China's exports was hurt by the sluggish U.S. recovery and Europe's debt problems.

Many expect the latest rebound to peak in coming months before settling back to deliver growth of about 8 percent for the year, well below double-digit rates of the past decade.

Growth of 8 percent or so is about normal now for China, said Mark Williams of Capital Economics. There's scope for a lot of people to be disappointed, because many still have an inflated sense of how fast China should be growing.

The slowdown was due largely to government controls imposed to cool a real estate boom and surging inflation fueled by Beijing's massive stimulus in response to the 2008 crisis. But it worsened as demand for Chinese exports dropped unexpectedly, raising the risk of job losses and unrest.

This week, the World Bank cut this year's growth forecast for China from 8.6 percent to a still-rapid 8.4 percent.

Growth could suffer a setback if China's high investment rates slacken or global trade weakens, the bank said.

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