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Context of 'October 1-December 31, 2008: China’s Growth Slows Sharply in Fourth Quarter 2008'

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China’s economic growth slumps to 6.8 percent in the fourth quarter of 2008, down from 9 percent in the third quarter. The decline is due to the global financial crisis, but is close to market expectations of 7 percent. The National Bureau of Statistics comments, “The international financial crisis is deepening and spreading with continuing negative impacts on the domestic economy.” This means that China’s annual economic growth is only 9 percent, the lowest level for seven years. In the previous five years annual growth had been over 10 percent, making China the third-largest economy in the world. Following the release of the figures in early 2009, many economists, especially those at Western banks, believe China will expand by no more than 5-6 percent in 2009, which would be the weakest performance since 1990. “We expect growth of 6.0 percent for 2009 as a whole, with risks still skewed to the downside,” Royal Bank of Canada says in a commentary. Others agree the economy will remain weak in the first half but think Beijing will hit its target of 8 percent growth for all of 2009 as November’s 4 trillion yuan ($585 billion) stimulus package and much easier monetary policy kick in. “The government has realized the fact that the economy is declining and regards the 8 percent target as a political task. Therefore, I think we can achieve the goal,” says Jin Yanshi, chief economist at Sinolink Securities in Shanghai. [Reuters, 1/22/2009]

Entity Tags: Jin Yanshi, Royal Bank of Canada

Timeline Tags: Global Economic Crises

Official numbers released today show that the US economy fell by 6.2 percent during the fourth quarter of 2008. The decline was much worse than analysts initially predicted, sending US stocks spiraling lower. “Plunging exports and the biggest fall in consumer spending in 28 years dragged the annualized figure down from the preliminary estimate of 3.8 percent,” the BBC reports. As a whole, in 2008, the economy grew at its slowest pace since 2001, posting a mere 1.1 percent growth. The blue-chip Dow Jones industrial average dropped 119.15 points, or 1.66 percent, to 7,062.93. The broader Standard & Poor’s 500 Index fell 2.36 percent to 735.09, a 12-year low. US consumer spending accounts for nearly two-thirds of domestic economic activity, but fell by a rate of 4.3 percent in the final quarter—the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5 percent. Rising unemployment, sliding home values, increasing numbers of repossessions, and the slumping value of investments indicate that many US consumers are hanging on to disposable cash. US exports fell at the sharpest rate since 1970 at an annual rate of 23.6 percent, down from 19.7 percent. Prior to the current economic crunch, exports supported the economy. “It shows the weak state of the world’s largest economy,” says Matt Esteve, a currency trader at Tempus Consulting. “Latest GDP figures are just awful and illustrates the weak state of the world’s largest economy.” Boris Schlossberg, director of currency research at GFT Forex, adds, “There is doom all over,” but predicts that the dollar would not weaken too much against the euro since “there’s no good news on the other side of the Atlantic, either.” [BBC, 2/27/2009]

Entity Tags: GFT Forex, Dow Jones Industrial Average, Matt Esteve, Standard & Poor’s, Tempus Consulting, Boris Schlossberg

Timeline Tags: Global Economic Crises

According to a survey of factories released by Credit Lyonnais South Asia (CLSA), a brokerage firm that monitors Asia-Pacific markets, although Chinese manufacturing contracted in January and February, the rate was slower in February than the previous month. The survey is issued as China’s legislature and a top government advisory body meet in Beijing. It is expected that the meeting will yield additional measures to stimulate the economy. In a statement released with the survey, CLSA declares, “The rate of contraction remained marked, reflecting a reduction in global demand and an uncertain economic outlook.” Manufacturing is reportedly 40 percent of China’s economic output. A drop in exports demand has led to thousands of factory closures, prompting protests by laid-off workers. Chinese leaders are concerned that additional job losses may fuel unrest. According to the CLSA survey, production and new orders fell in February, and manufacturers continued to shed jobs in an effort to cut costs. “Manufacturing activity is still contracting, only at a more moderate pace than at the end of 2008,” says Eric Fishwick, the head of CLSA’s economic research. China is one of the few major economies still growing, although growth fell to a seven-year low of 6.8 percent in the final quarter of 2008, compared with the same period a year earlier. Last November, the government announced a $586 billion plan to boost domestic consumption in an attempt to assist in cushioning the impact of the global slowdown. Officials say that the effects of public works spending will be slow. Quoting Premier Wen Jiabao, Xinhua News Agency reports that some indicators, such as recent upturns in power demand and rising steel output, suggest that the economy is stabilizing. However, trends remain dismal in the US and around the globe. “China cannot expect to recover just by spending its way out of the slowdown,” says Jing Ulrich, JP Morgan’s chairwoman of China equities in a report issued today. “While early signs of economic stabilization are encouraging, it remains to be seen if this uptrend is sustainable.” [International Herald Tribune, 3/2/2009]

Entity Tags: JP Morgan Chase, Credit Lyonnais South Asia, Jing Ulrich, Eric Fishwick, Xinhua News Agency, Wen Jiabao

Timeline Tags: Global Economic Crises

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