Jan 17 (Reuters) - China"s economy grew 4.0% in the fourth quarter from a year earlier, faster than expected but its weakest expansion in one-and-half years, National Bureau of Statistics data showed on Monday. Gross domestic product (GDP) had been forecast to expand 3.6% from a year earlier, according to a Reuters poll of analysts, slowing from 4.9% in the third quarter. read more ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ KEY POINTS * Q4 GDP +4.0% y/y (f"cast +3.6%, Q3 +4.9%) * Q4 GDP +1.6% q/q s/adj (f"cast +1.1%, Q3 +0.7% revised) * December industrial output +4.3% y/y (f"cast +3.6.%, Nov +3.8%) * December retail sales +1.7% y/y (f"cast +3.7%, Nov +3.9%) * Jan-Dec fixed asset investment +4.9% y/y (f"cast +4.8%, Jan-Nov +5.2%) MARKET REACTION Chinese blue chips (.CSI300) were up 0.5% and the Hong Kong benchmark (.HSI) lost 0.4%. COMMENTARY: IRIS PANG, ECONOMIST, HONG KONG, ING "The headline figure was worse than my expectation and it was surprising that retail sales grew only 1.7% year-on-year in December. If we exclude automobiles, it was 3%. So, it was the automakers sector that really derailed the whole retail sales. "I think that"s due to the lack of semiconductor chips. This may continue into 2022 because the lack of semiconductor chips is not going to go away. We may have some improvement in the latter part of this year, but not in the first half." CARLOS CASANOVA, SENIOR ASIA ECONOMIST, UNION BANCAIRE PRIVEE, HONG KONG "The 1Y LPR signalled that another rate cut was coming. Typically both move in tandem, according to China"s new interest rate corridor. However, the 10 bps cut was larger than expected, suggesting that the authorities have become more preoccupied about weakness in the economy. "(Omicron risks) will only start to be fully priced in the combined Jan-Feb data, as the most severe lockdowns started in late December. We may have to wait until the March data trove to have a better understanding of what this means for activity. "We expect an additional 100 bps RRR cut and an inflection point in terms of M2 growth (forecasting 10.5%) and outstanding credit growth (forecasting 12%) in Q1-22, in order to fend off risks to the growth outlook. China needs to grow at least 5% in 2022 to achieve its per capita GNI target in 2025." BACKGROUND: * The world"s second-largest economy, which cooled over the course of last year, faces multiple headwinds in 2022, including persistent property weakness and a fresh challenge from the recent local spread of the highly contagious Omicron variant. * Policymakers have vowed to head off a sharper slowdown, ahead of a key Communist Party Congress late this year. * The People"s Bank of China on Monday cut the borrowing cost of its medium-term loans for the first time since April 2020, defying market expectations, in a bid to cushion economic slowdown. It also reduced the interest rate on the seven-day reverse repurchase agreements. read more * Policymakers have also pledged to step up fiscal support for the economy, speeding up local government special bond issuance to spur infrastructure investment and planning more tax cuts.