Chinese GDP grew by 8.9 per cent in the year, compared with 9.1 per cent in the 12 months to the third quarter.
Over the three-month period the economy expanded by just two per cent, with housing and exports weighing on growth.
Investment in property fell by almost 40 per cent from November to December, underscoring risks to domestic demand.
Meanwhile sluggish demand from a weak Eurozone – a key market – has hit exports.
Markets responded well to the figure, and still expect a further loosening of monetary policy to counter the slowdown.
Hong Kong’s Hang Seng stock index jumped 3.24 per cent, Japan’s Nikkei rose 1.05 per cent, and the Australian ASX closed up 1.65 per cent.
Regional currencies were also boosted, with the Australian and New Zealand dollars both up against the US dollar.
“The recent dip in the consumer price index measure of inflation does give the People’s Bank of China some scope to cut interest rates in order to stimulate growth if required,” said Investec’s Lee McDarby.
However, the degree of monetary loosening is likely to be limited – Premier Wen Jiabao (pictured) has described his policies as “fine-tuning.”
Official news agency Xinhua welcomed the GDP figures, arguing that the economy is moving to a more stable long-term footing.
“For the reform-minded economic architects in China, slower, more balanced growth may bring about a happier ending,” the agency’s editorial said, describing earlier years’ growth – at levels of 10 per cent and above – as “dizzying.”
The slowdown is “desired by policymakers who sought to cool down the country's property market.”
“Even when the Chinese engine is downshifted, it still has the power and potential to drive the world economy,” the agency said.