China economy grows at slowest pace in 24 years

China's economy grew at its slowest pace in 24 years in 2014, official data showed on Tuesday, undershooting the government's target for the first time since 1998.

Gross domestic product (GDP) expanded 7.4 percent from 7.7 percent in 2013. Government targets have been for a print of "around 7.5 percent."

Growth in the world's second biggest economy has not fallen below 7.6 percent since 1990, when it grew 3.8 percent as a result of international sanctions in the wake of the Tiananmen Square massacre.

Still, investors chose to focus on the fourth quarter GDP growth figure, which came in at 7.3 percent from the year-ago period, beating the 7.2 percent forecast by analysts and holding steady from the prior quarter.

China's Shanghai Composite index closed up 1.85 percent while Hong Kong's Hang Seng traded 0.7 percent higher. The Australian dollar strengthened on the news, trading briefly above $0.82, and touched 97.02 against the yen.

Other data also painted a rosier picture. Retail sales for December rose 11.9 percent from the year ago period, beating forecasts for 11.7 percent, while industrial output climbed 7.9 percent on-year, better than the consensus print for 7.4 percent.

Fixed asset investment, a key growth driver, climbed 15.7 percent in the whole of 2014 from the previous year, just below forecasts for a 15.8 percent rise.

"[The data] was pretty much slightly stronger than expectations across the board. Retail sales surprised slightly on the upside, industrial production was pretty firm. The GDP number was just a tad higher. The authorities should be pleased with the number and I think we needed some good news after the drop on Shanghai Composite yesterday," said Jonathan Pain, author of The Pain Report.

Chinese stocks plunged nearly 8 percent on Monday, after the country's securities regulator rapped three major brokerages for continuing to lend money for stock purchases in violation of rules.

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China's economy has been grappling with a slowing property market, a deflationary environment and chronic overcapacity problems in recent years.

China's central bank cut interest rates in November for the first time since 2012, surprising markets as the government has repeatedly signaled its tolerance for slower growth with the economy transitioning from reliance on investment and towards domestic consumption.

Many economists are expecting Beijing to set its growth target for 2015 at around the 7-percent level. The World Bank last week lowered its China's growth target for this year to 7.1 percent from its previous forecast of 7.2 percent projected in October.

"The challenge for Beijing going forward is to strike a balance between growth and structural reforms. Beijing wants to make sure there is a reasonable amount of growth for it to push through reforms," Chi Lo, senior economist for Greater China at BNP Paribas Investment Partners, told CNBC.

"In the short term, investors will be watching the growth target that Beijing will set at the National People's Congress in March. Markets have been talking about 7-7.5 percent which is a reasonable range and Beijing will set that as their target to give it flexibility," he added.

More easing, housing remains a concern

With the property sector still sluggish at best, analysts see further aggressive action from policymakers.

Data on Tuesday showed property investment, a main driver of the economy, rose 10.5 percent in 2014 from a year earlier, the slowest pace since the January-July period of 2009. This compared with an annual rise of 11.9 percent in the first 11 months of 2014 and 19.8 percent growth through 2013.

"The property market is still slowing amidst tight funding condition and cooling investment," Qu Hongbin, co-head of Asian Economic Research at HSBC, wrote in a note.

"We believe more aggressive easing measures, in the form of another 50 basis point cut (bps) to the policy rate and 150bps cut to the reserve ratio, as well as more growth-supporting reform measures, will be needed in the coming months to anchor domestic demand and sustain growth," he added.