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Fears of sharp slowdown of the Chinese economy as imports keep sliding

Tuesday, September 11th 2012 - 05:24 UTC
Full article 3 comments
Factory output growth below 10% for the fifth month running Factory output growth below 10% for the fifth month running

China's exports grew less than forecast and imports fell in August, adding to fears about a sharp slowdown in its economy. Exports rose by 2.7% from a year earlier as global demand continued to remain subdued. Imports fell 2.6% from a year ago, indicating a decline in home grown consumption.

China has been trying to boost domestic demand in a bid to rebalance its growth and offset slowing demand for exports. Analysts said that the fall in imports indicated that domestic consumption was not growing fast enough.

“The import surprise on the downside is very unusual. It is an alarming sign for the government and they probably saw it coming,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.

“We've now pretty much got the full batch of August data and it's clear that the slowdown pressure is growing.”

The data comes just a day after Beijing said that industrial production grew at its slowest pace in more than three years in August. Output rose by 8.9% from a year earlier, data released by the National Bureau of Statistics over the weekend showed.

China's manufacturing sector has been one of the key drivers of its growth over the past few years. However, a decline in demand for Chinese exports from key markets in the US and Europe has hurt growth in the sector.

Growth in factory output has stayed below 10% for five straight months now, the longest such streak since the global financial crisis. Analysts said that slowing growth in the sector was a big concern.

“With the industrial production growth continuing to slump, there are now fears that earlier expectations that economic growth may pick up in the second half of the year, may not be realised,” said Alistair Thronton of IHS Global Insight in Beijing.

The latest set of weak data has raised hopes that China's policymakers will introduce fresh measures to boost the economy. Last week, Beijing approved infrastructure projects worth more than 150bn dollars, its latest step to try to spur a fresh wave of economic development.

China has already cut interest rates twice since June this year, to bring down the cost of borrowing for consumers and businesses.

It has also lowered the reserve ratio requirement which is the amount of money banks must keep in their reserves, three times in the past few months, in a bid to boost lending.

Analysts said that given the slowdown in key sectors and the continued gloomy outlook for the global economy, Beijing may ease its policies further in the near term.

“The conditions have become increasingly ripe for one or two more reserve ration requirement cuts and a probable interest rate cut later,” Louis Kuijs, chief China economist at Royal Bank of Scotland told the BBC.

However, he said that stimulus measures taken by Beijing will be less significant than those introduced by China after the global financial crisis in 2008 and 2009. (BBC).-
 

Categories: Economy, International.

Top Comments

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  • ChrisR

    I always thought the Chin were clever.

    Following the stupid practices of the cnut Brown (who saved the world - NOT) and Bernanke in giving away money, and then reducing the reserve ratio is just asking for bank defaults.

    It needs much more work by the Chinese Goverment on the Chinese people to stop saving (which is the real way of keeping money safe) and spend it instead.

    Just not in their make-up.

    Sep 11th, 2012 - 08:28 pm 0
  • British_Kirchnerist

    Its been a bad year for the Chinese economy no doubt; but the west would kill for a “slowdown” like this...

    Sep 15th, 2012 - 08:12 am 0
  • ChrisR

    @2

    I think you have missed the real point here.

    They are terrified that this downward trend (with respect to the data preceding it) will continue or even get worse.

    When industry has geared up for the seemingly ever upward and onward trend, by employing more people (from the countryside because there is nowhere else to get them) and buying new plant and machinery and then suddenly the brakes go on you end up with a lot of people out of work (which is happening).

    Nothing excites the minds of a communist government more than the thought of dissesnt and 'action' by the people.

    Remember a few years ago when the workers could not get home for their only holiday of the year due to the railways being unable to cope with the weather? It was the present 'Dear Leader' (he was waiting for the upcoming change in 'leadership' at the time) who went to the NE & NW areas to placate them and APOLOGISE!!! The Chin never apologise apart from superficiary diplomatic ones. His action was unique.

    That is why a downturn is so dangerous. OK now?

    Sep 15th, 2012 - 11:50 am 0
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