China’s economy expanded 7.4% from a year earlier in 2014, the slowest pace in 24 years as the country’s growth has entered a phase of “new normal,” the National Bureau of Statistics (NBS) said. However, analysts said the fourth-quarter performance turned out to be better than expected, and they expected growth to be at a stable level in the coming months. China’s gross domestic product amounted to CNY63.6 trillion last year, strengthening its position as the world’s second-largest economy. Growth was led by the service sector, which gained 8.1% to CNY30.7 trillion. Manufacturing added 7.3% to 27.1 trillion, while agriculture rose 4.1% to CNY5.8 trillion. The economy grew 7.3% in the fourth and third quarters, after a rise of 7.5% in the second and 7.4% in the first. “The rate of 7.4% is hard earned and is within a reasonable range. The growth target also needs to be adapted to the new normal when the country is changing growth gears,” NBS Director Ma Jiantang said. He added that growth was accompanied by an inflation rate of 2% last year and stable employment. In 2014, China created 13.22 million new jobs, surpassing the full-year target of 10 million and taking the working population to 772 million, 2.76 million more than in 2013. Fixed-asset investment (FAI) grew 15.7% to 50.2 trillion in 2014, and retail sales accelerated 12% to CNY26.2 trillion last year with online spending surging 49.7% to CNY2.7 trillion. Chinese authorities are expected to set a growth rate of around 7% for 2015, the Shanghai Daily reports.

China’s consumption is on track to replace investment as the main engine of economic growth, making a long-promised rebalancing of the economy a reality. Dubbed the “third engine” of the economy, consumption contributed 51.2% to gross domestic product (GDP) growth in 2014, up from 48.2% a year ago. “China’s consumption on average is expected to outpace investment and GDP with a growth of 7% to 8% in real terms in the next few years,” Wang Tao, Chief China Economist at UBS told the South China Morning Post. Total retail sales were CNY26.2 trillion in 2014, up 11.9% in nominal terms. Car sales were up 6.1% year-on-year from 2% previously and purchases of household appliances accelerated by 12.6% in December versus a year ago. Debt and deflation are the two biggest risks facing the Chinese economy and may take years to resolve as a slowdown looms, according to Peking University Professor Michael Pettis. Yu Yongding, Professor at the Chinese Academy of Social Sciences (CASS) thinks it could take five years to eliminate the economy’s excess capacity.