MercoPress. South Atlantic News Agency

IMF says China remains “robust” but '09 is “difficult year”

IMF?s Burton : “I hope we'll see some recovery in 2010”

China's economy will slow but should remain relatively strong and help to support the rest of Asia, the International Monetary Fund said on Monday, predicting a very difficult year for the global economy in 2009.

"Growth in China is going to slow but remain relatively robust," David Burton, Asia-Pacific director of the International Monetary Fund, told reporters in Hong Kong. "It should be a source of strength for the region." Burton said the global economic environment would be tough in 2009. "The global economy is slowing and 2009 will be a very difficult year," he said. "I hope we'll see some recovery in 2010". The IMF official statements follow the release of the CLSA China Manufacturers Purchasing Managers Index (PMI) showing that factory activity contracted sharply during October, with the index falling to its lowest level since the surveys began in June 2004. Based on monthly questionnaires sent to 400 Chinese manufacturers asked to give month-on-month comparisons, the survey is widely considered one of the most robust leading indicators in China, where economic data are often suspect. The PMI is also important because manufacturing accounts for about 42% of China's gross domestic product. A rating of 50 is the cutoff for expansion/contraction. In October it registered 45.2, down from 47.7 in September. Evidence of the manufacturing slowdown in China has been around for some time. In Guangdong province, traditionally the center of China's light industry, nearly half the toy manufacturers have gone out of business. Some have moved to cheaper locations inland, but others have disappeared altogether, often leaving workers with several weeks of unpaid wages. The deterioration in China's economic outlook has been relatively recent. In mid-summer, only pessimists expected China's GDP growth to slow next year to 8%, a level necessary to ensure the absorption of new labor entrants into the work force. Anything below this could by Chinese economic standards be considered a recession. Any effective program is also expected to address China's property problems, according to analysts. Real estate accounts for 25% of all fixed investment in China and although the government introduced measures to boost the housing market by cutting required down payments from 30 to 20% and reducing fees related to home purchase, buyers are not returning to the market. Thousands of developers are desperate for cash, which in turn makes banks highly vulnerable.