- The Washington Times - Thursday, January 22, 2009

BEIJING (AP) China’s economic slump deepened in the fourth quarter as the impact of the global crisis spread, data showed Thursday, adding to the threat of more heavy job losses and possible unrest.

Economic growth in the three months through December plunged to 6.8 percent compared with a year earlier, down from 9 percent the previous quarter, the government said. It was the weakest quarter since at least 1992, when Beijing began reporting quarterly economic data, Goldman Sachs said.

“The international financial crisis is deepening and spreading, with continuing negative impact on the domestic economy,” said Ma Jiantang, the commissioner of the National Bureau of Statistics, at a news conference. In a report, the government promised steps to ensure “a harmonious and stable society.”

There was more gloom elsewhere in Asia: Japan, the region’s biggest economy, said Thursday that exports plunged 35 percent in December from a year ago, the steepest drop on record. And South Korea said its economy shrank 3.4 percent in the fourth quarter as exports plunged.

The figures highlight the vulnerability of Asia’s export-dependent economies.

Beijing announced a 4 trillion yuan ($586 billion) plan in November to shield China from the global slowdown by boosting domestic consumption, but its effects are not expected to be felt for several months. Other governments in the region have also announced big stimulus plans, and central banks have slashed interest rates.

Chinese exporters have been hit hardest but the slump is spreading to domestic industries as demand for autos, real estate and other goods weakens. Exports fell in November and December for the first time in seven years.

The manager of the Beijing Xingrui Furniture Co., which sells to the domestic market, said sales are down 50 percent from the same time last year.

“There are fewer apartments being sold, so it’s hard to sell new furniture,” said the manager, who would give only her surname, Hu. “I think 2009 will be even worse.”

Thousands of factories have closed in the export-driven southeast and estimates of job losses exceed 2 million. Spooked by scattered labor protests, communist leaders worry about rising tensions and possible unrest as laid-off workers stream back to their hometowns. They have promised to create new jobs and are pressing employers to avoid more layoffs.

“Especially since October, the impact of the global crisis spread from small and medium-size enterprises to larger enterprises, from eastern coastal regions to China’s heartland,” Ma said.

Chinese Premier Wen Jiabao, the country’s top economic official, is due to visit Europe to discuss measures to combat the global slowdown.

The weak fourth quarter dragged down China’s 2008 annual growth to a seven-year low of 9 percent, breaking a five-year streak of double-digit expansion. It was a steep drop from 2007’s 13 percent, which saw China pass Germany to become the world’s third-largest economy after the United States and Japan.

Analysts say conditions should get even worse before they improve and have cut forecasts of 2009 growth to as low as 5 percent.

A turnaround will depend on government spending because investment by private companies is likely to weaken further, said Jing Ulrich, JP Morgan & Co.’s chairwoman for China equities.

“While China’s policymakers have sought to reorient economic growth from trade to consumption, the adjustment of consumer spending patterns will not happen overnight,” Ulrich said in a report.

A string of Chinese airlines, steel producers and insurers have warned that 2008 profits due to be reported in coming weeks will plunge. Airlines face large losses due to falling travel and the cost of wrong-way bets on fuel prices.

The government stimulus calls for higher spending on construction and other projects but its goal is to persuade private companies and Chinese consumers to spend more. Analysts say that will be tough to achieve while families still feel compelled to save up to 50 percent of their incomes to pay for health care, education and other necessities.

Beijing has promised to create a social safety net to reduce such burdens. It announced Wednesday it will spend 850 billion yuan ($124 billion) to improve health care in an apparent effort to encourage households to save less and spend more.

Ma said some sectors showed positive signs. He said retail sales rose 17.4 percent in December from the year earlier up 0.8 percentage points from October’s growth rate. Still, that was down from 20 percent-plus rates earlier in the year. And retail sales are still a small share of China’s economy.

“As long as we keep improving the environment and take measures to address people’s misgivings about spending by improving social security, I believe we will continue to see an increase in consumption,” Ma said.

AP researcher Bonnie Cao in Beijing contributed to this report.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide