Beijing: China's economy grew at its slowest pace in a quarter of a century last year as it undergoes a difficult transition data showed Tuesday escalating concern over a crucial driver of global expansion.

The 6.9 percent figure was the slowest in the People's Republic since the 3.8 percent of 1990 a year after the bloody Tiananmen Square crackdown rocked the country and isolated it internationally.

World markets have been hammered in recent weeks by worries over China the world's number two economy and its fourth-quarter expansion also slowed to 6.8 percent the National Bureau of Statistics (NBS) said the softest since the global financial crisis.

Both figures matched the median forecasts in an AFP survey of 18 economists.

"The economy is in the process of stabilisation but it hasn't stabilised yet" Liao Qun chief economist at Citic Bank International in Hong Kong told AFP.

China's leaders -- who targeted growth of "about seven percent" -- are looking to transform the country's economic model away from the investment and exports of the past to one more oriented towards domestic consumer demand.

The services sector accounted for 50.5 percent of gross domestic product (GDP) in 2015 the NBS said in a statement the first time it was more than half the economy.

The structural transformation was still underway it added calling it "a crucial period during which challenges need to be overcome and problems need to be resolved".

"The task of comprehensively deepening the reform is still heavy" the body said.

Last year's growth was well below the 7.3 percent of 2014 and the AFP survey projected it would fall to 6.7 percent this year.

"The situation in 2016 will be more or less the same as in 2015 and China's economic growth will still face a complicated and volatile international situation" NBS chief Wang Baoan told reporters.

But while some sectors will see destocking and overcapacity reduction he pointed to new areas such as online retail and renewable energy cars as still growing fast.

As such he said: "We think in 2016 China's economic growth will remain stable. We are confident in that."

The Communist party is widely expected to lower the growth target this year and President Xi Jinping has said expansion of 6.5 percent will be sufficient for China's needs.

- Challenges -

Questions have repeatedly been raised about the accuracy of official Chinese economic statistics which critics say can be subject to political manipulation and even Premier Li Keqiang has reportedly expressed doubts about the data.

Unexpected moves in the yuan exchange rate -- after a surprise devaluation in August -- have also disturbed investors in recent weeks with fears the real picture is worse than portrayed and authorities may not be able implement reforms to make the economy more market-driven.

Julian Evans-Pritchard China economist for Capital Economics said in a note: "The continued stability of the official GDP figures will do little to assuage concerns over their credibility."

While official figures should not be taken at face value he said the data "don't suggest that China is now entering a deeper economic crisis" and his group expects China's results "to gradually turn more upbeat over the next few months".

But some economists forecast a rockier year.

Zhao Yang of Nomura reiterated the bank's 5.8 percent forecast for 2016 due to "strong headwinds" and overcapacity in manufacturing along with an excess supply of property.

China's industrial production which measures output at factories workshops and mines rose 5.9 percent year-on-year in December the NBS said from 6.2 percent in November.

Retail sales a key indicator of consumer spending increased 11.1 percent year-on-year in December -- down a fraction from November -- while fixed asset investment a measure of spending on infrastructure expanded 10.0 percent in the year.

Those results fell short of forecasts according to a survey by Bloomberg News which predicted retail sales rising 11.3 percent in the month and industrial production expanding 6.0 percent.

But Chinese stocks were up solidly by lunch. The benchmark Shanghai Composite Index rose 1.64 percent to 2961.58 while the Shenzhen Composite Index which tracks stocks on China's second exchange gained 1.41 percent to 1856.09.

AFP