China to boost its slowing economy
Tuesday, October 21, 2008
SHANGHAI, China -- China's economic growth slackened to 9 percent in the third quarter of this year, its slowest in more than five years, as leaders pledged to boost lending, increase export rebates and slash taxes on housing transactions to help cushion the blow from the global credit crisis.
Growth in the first nine months of the year was 9.9 percent over a year earlier, the National Statistics Bureau reported Monday. That compares with 11.9 percent growth for all of 2007.
"There are no signs of a definite recovery from the financial crisis," bureau spokesman Li Xiaochao said in a nationally televised news conference.
"The growth rate has moderated," Li said.
The 9 percent expansion in the third quarter was the slowest since the second quarter of 2003, when disruptions due to the outbreak of Severe Acute Respiratory Syndrome, or SARS, cooled growth to 6.7 percent.
It compares with 10.6 percent growth in the first quarter of the year, and 10.1 percent in the second quarter.
Economists have cut China's growth forecasts to as low as 9 percent for the year. That would be the highest rate for any major economy, but Beijing needs to keep growth robust to reduce poverty and minimize job losses that could fuel political tensions.
Instead of bouncing back after a break during the Olympics, China's industrial boom has slowed as demand for the country's exports has fallen.
"China's manufacturing sector is not immune from the global economic downturn," said Sherman Chan, an analyst for Moody's Economy.com.
China is seeing protests by laid-off workers about missing paychecks from bankrupt factories. Meanwhile, higher-income workers are feeling the pinch of sinking share prices and a weak housing market.
Weak export growth means Chinese imports of raw materials and other manufacturing inputs are slowing -- more bad news for countries counting on robust sales to China to help them weather weakness in other export markets.
"We expect a further deceleration in industrial production growth as export oriented industries such as garments and toys grapple with external weakness, and heavy industries from steel to autos adapt to declining domestic demand," Jing Ulrich, chairwoman of China equities for JP Morgan Chase & Co., said in a report to clients.
Still there are glimmers of good news.
Politically sensitive inflation slowed in September to a 15-month low of 4.6 percent, the bureau reported. That compares with a 12-year peak of 8.7 percent hit in February.
The easing of upward consumer price pressures, thanks largely to moderating food costs, could free Beijing to do more to help jump-start growth. In recent years, China has made a priority of seeking to rein in bank lending and other factors blamed for pushing prices higher.
Leaders meeting over the weekend pledged new measures to spur lending and stabilize the country's volatile financial markets.
"Financial, credit and foreign trade measures will be carried out in the near future in response to the slowing trend of the country's economic growth," the official Xinhua News Agency said in a report late Sunday, citing a meeting of the State Council, or Cabinet.
Share prices have continued to fall despite a raft of market-boosting measures. On Monday, the benchmark Shanghai Composite Index fell was down 0.7 percent to 1,916.55 by midday.
Corporate profits and tax revenue are declining, and export-dependent small and medium-size companies are hurting, Li of the statistics bureau acknowledged.
Among measures planned, banks will be encouraged to lend more and companies will get support for technology innovations, Xinhua said. Infrastructure construction, reconstruction of the region devastated by the May earthquake in central China and the social welfare system will get special attention, it said.
The State Council decision includes plans to boost imports while also promoting exports by increasing rebates of value-added taxes on products ranging from labor-intensive textiles to more costly electronic equipment, it said without giving more specific details.