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China's economy slows sharply as global crisis hits
2009-01-21
BEIJING (AFP) - China's economy slowed dramatically at the end of 2008 as the full force of the global crisis hit home, dragging growth to a seven-year low, official data showed Thursday. The world's third-largest economy expanded by just 6.8 percent in the final quarter, pulling the full-year growth figure down to 9.0 percent, the National Bureau of Statistics said. Coming after 13.0 percent growth in 2007, the figures offered the most complete picture yet of just how severely the world crisis has hit China's export-dependent economy. "The international financial crisis is deepening and spreading with a continuing negative impact on the domestic economy," Ma Jiantang, the head of the National Bureau of Statistics, told reporters in Beijing. China's exports declined 2.2 percent in November, the first such drop in seven years, and the trend was extended into a second month with a 2.8 percent drop in December, according to previous data from customs. In another sign of the precipitous decline of activity, the consumer price index, the main gauge of inflation, slowed to 1.2 percent in the December, the statistics bureau said. China started out 2008 concerned that rising prices would be a major challenge -- inflation was at nearly a 12-year high of 8.7 percent in February -- but ended the year fearing deflation instead. "China's economy suffered a hard landing in the fourth quarter," said Lu Zhengwei, a Shanghai-based economist with China's Industrial Bank. Lu said China would definitely suffer deflation in the coming months and it would be extremely difficult for the economy to grow this year by 8.0 percent, a figure the government has long targetted as its benchmark rate. The nation's industrial output, another indicator of foreign trade, expanded by 12.9 percent in 2008, down from 18.5 percent growth in 2007, the bureau said. Earlier this week, Premier Wen Jiabao warned that 2009 would be "the most difficult year for China's economic development so far this century." From the Chinese government's perspective, the most worrying aspect is the impact on employment and the subsequent potential for social unrest if many people are out of work. In the last three months alone, 560,000 Chinese joined the army of the unemployed, according to official data this week that almost certainly understated the actual extent of the problem. Especially hard-hit are migrant workers who have left their rural homes for jobs in the big cities and now find factory gates shut all along the formerly bustling east coast. Thousands of factories that exported to the United States and elsewhere have already closed, and many more are expected to fold in the next few months. China unveiled a four-trillion-yuan (580-billion-dollar) stimulus package in November to get the economy going. "How much China can recover from the economic downturn depends on the effectiveness of government stimulus packages and expansionary fiscal policies," Lu said. While some of the package consisted of items that had already been announced, economists said it was significant in signalling to society a willingness to spend big money to escape the worst effects of the crisis. Partly reflecting this, China's fixed asset investments, the main measure of public spending on infrastructure and productive capacity, rose 25.5 percent in 2008, according to the bureau. This compared with 2007 growth in investments in fixed assets of 24.8 percent, suggesting that China's government had deep enough pockets to keep this part of the economy going at a brisk pace. Retail sales, a main measure of consumer spending, were up 21.6 percent in 2008, an increase from 16.8 percent in 2007. However, official retail sector statistics have been disputed by some economists, who believe the nation's shops and malls are actually far less busy than the data suggests. A survey in December of more than 3,000 people in 10 major cities showed that consumer confidence was at the lowest level in six years.
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