China's economic growth has slowed down in the fourth quarter, as the government looks to rebalance the economy shifting from investment-led growth to consumption-led growth.

In the fourth quarter, China recorded a growth rate of 7.7% year-on-year, down from 7.8% in the third quarter. However, the growth rate was better than economists' projections for 7.6%.

The fourth-quarter gross domestic product (GDP) growth was 1.8% sequentially, down from 2.2% in the third quarter.

For the full year 2013, the world's second-largest economy grew 7.7%, unchanged from 2012 and the slowest pace of growth since 1999. However, the yearly growth rate was better than the government's target of 7.5%.

The growth slowdown was primarily due to the country's lower fiscal spending and continued credit tightening measures.

"The pace of government spending slowed in Q4, largely due to the austerity efforts initiated by China's top leadership to counter corruption," said Li-Gang Liu and Hao Zhou at ANZ Research.

"By the end of November, the Ministry of Finance held a record high of RMB4.1trn ($672bn, £409bn, €497bn) deposits in the PBoC account, suggeting that the pace of fiscal spending has been slower than expected."

The analysts added that the liquidity tightness in the country has dragged down economic growth.

"New yuan loans came in at RMB482bn in December, indicating that Chinese commercial banks were reluctant to lend during the liquidity tightness, which could have not only increased the corporates'funding costs but also had a negatively impact the companies' expansion plan for the coming year," they said.

Further Slowdown

Economists expect China's full-year GDP growth to decline to about 7.4%, which would be the country's slowest pace since 1990.

"The growth target would be lowered to 7% in the final two years of the 12th five year plan in order to allow room for structural reforms and to address the problem of overcapacity and outdated capacity, especially in heavy industries," said ANZ analysts.

The Communist Party's third plenum in late November had laid out China's upcoming financial, administrative and land reforms over the next five years. Analysts expect that the reform policies will weigh on the country's economic growth over the next two years.