Data released by the National Bureau of Statistics showed that the growth rate, the weakest expansion in 13 years, was down from 9.3 per cent in 2011 and 10.4 per cent in 2010.
The economy's fourth-quarter growth quickened to 7.9 per cent on government pro-growth measures. The rate ended a seven-straight-quarter slowdown, according to the data.
In 2012, the gross domestic product reached 51.93 trillion yuan (USD 8.28 trillion).
The growth rate, however, is still marginally higher than the 7.5 per cent target fixed by the government.
The Chinese economy mainly driven by the exports has missed its double-digit growth posting 9.3 per cent, the data showed.
The GDP for 2011 stood at 47.29 trillion yuan (USD 7.45 trillion).
There were apprehensions whether the GDP would miss the official target when it posted 7.4 per cent growth in the third quarter this year, but it picked up in the last three months mainly driven by Christmas and New Year sales in the last three months of the year.
Analysts said stimulus measures introduced by the Chinese government has averted further slowdown.
Government stimulus measures introduced since early 2012 have produced results, a state run Xinhua news agency report said.
"They have helped reverse the slowdown and stabilise the growth," Wang Jun, an economist at the China Center for International Economic Exchanges, one elite think-tank in Beijing said.
GDP figures headed a string of other encouraging economic data on Friday.
Retail sales, a key indicator of consumer spending, rose 15.2 per cent from a year earlier in December, up from 14.9 per cent in November, the report said.
The growth of industrial production accelerated to 10.3 per cent year-on-year in December from November's 10.1 per cent pace.
Fixed-asset investment, a measure of government spending on infrastructure, also increased 1.53 per cent from November to December.
China's exports, a key driver of the economy, also trumped market forecasts to grow 14.1 per cent year-on-year in December, up from November's 2.9 per cent, customs data showed last week.
"I think the economy's growth has been stabilised, but whether the rebound will continue remains unclear," said Zhang Liqun, an analyst with the Development Research Center of the State Council said.
China's economy rebounded in the final quarter of 2012 but optimism was tempered by warnings the shaky recovery could be vulnerable to a possible downturn in global trade.
China's major economic risks in 2013 still lie in uncertainties in its external markets and domestic property sector, Zhang said.
The government pared the full-year growth target for 2012 to 7.5 per cent from 8 per cent in early 2012.
Many economists are expecting the target to remain unchanged for this year.
The slow growth rate, compared to be blistering double digit GDP rates which China used to for the past three decades is a new phenomena, the new Chinese leadership, headed by Xi Jinping is expected to address.
Xi along with a host of new leaders at various levels were elected in the once-in-a-decade leadership change conference of the ruling Communist Party of China in November last.
He is scheduled to take over as the President succeeding Hu Jintao in March this year.
The number two leader, Li Keqiang, who is an economist is set to succeed, Premier Wen Jiabao.
Economic stability was stated to be the focus of the new leadership reorienting China's expert driven economy, in view global economic crisis to that of one based on domestic consumption, which officials say would take sometime.
Besides rapid urbanisation, which now crossed 52.57 per cent in 2012, drastically changing the complexion of China's agrarian economy, China is also faced with demographic crisis as a result of its over three decades old one child policy
impacting its cheap labour availability.
China has about 185 million people above the age of 60, or 13.7 per cent of the population at present.
The figure is expected to surge to 221 million in 2015 and about 30 per cent by 2030.
Chalking out its plans to speed up the growth rate, China has announced plans to allocate USD 103.56 billion for massive railway expansion this year.
Plush with USD 3.31 trillion foreign reserves, China was expected to step up its investments to further develop its infrastructure to spur growth and roll out limited stimulus packages.
China is also reorienting its exports strategy moving away from European Union, which in the past was its biggest trade partner to developing and emerging markets.
The government has taken measures to cool the property market to avert the chances of a bubble which analysts say has slowed the economy further.