The Chinese economy expanded at the slowest pace in more than two years in the fourth quarter of 2011 as a result of sluggish external demand and Beijing's past policy tightening to contain inflation and property prices.

Data from the National Bureau of Statistics showed Tuesday that the gross domestic product grew 8.9 percent year-on-year in the fourth quarter, the weakest pace since the second quarter of 2009.

This comes after 9.1 percent expansion in the third quarter and 9.5 percent growth in the second quarter. Economists had expected the rate of growth to slow to 8.7 percent.

Economic growth for the full year of 2011 decelerated to 9.2 percent from 10.4 percent in 2010. However, the outcome was in line with economists expectations. Sequentially, the economy grew 2 percent in the fourth quarter.

The statistical office also reported that China's industrial output growth accelerated slightly to 12.8 percent year-on-year in December from 12.4 percent in November. This was better than economists' forecast of 12.3 percent growth.

In 2011, urban fixed investment was 23.8 percent higher than a year earlier, softer than the expected growth of 24.1 percent. During eleven months ended November, investment saw a 24.5 percent growth.

Retail sales grew 18.1 percent from December 2010, while economists were looking for a 17.2 percent increase following a 17.3 percent rise in November 2011.

In December, the Conference Board warned the risk that the Chinese economy may be subjected

to a marked slowdown in the coming months is rising. It also said that the pass through from previous policy tightening measures will continue to act as a brake on the economy.

Chinese Premier Wen Jiabao has said that the first quarter of 2012 would be "difficult" for the economy and that the monetary policy will be fine-tuned as needed.

In December, the People's Bank of China slashed the banks' reserve requirements by half a percentage point for the first time in three years to shield the economy from global economic slowdown and the impact of weak external demand.

China's trade growth weakened markedly at the end of last year. According to data from the customs agency, the trade surplus in 2011 shrank to $155.14 billion from $183 billion in 2010.

The central bank is widely expected to lower the required reserve ratio (RRR) before Chinese New Year next week.

PBoC Governor Zhou Xiaochuan said earlier this month that the the country must brace itself for spillovers from the European debt crisis and a slowdown in global economic growth in 2012 despite a positive outlook for the domestic economy.