Chinese economy slows to lowest level in years. Wen: 2009 hardest year of century so far
Beijing (AsiaNews/Agencies) - A dramatic slowdown in the Chinese economy, which grew by only 6.8% in the last quarter of 2008, compared to the same period in 2007, and less than 9% for the entire year, compared to 13% in 2007: the news was released today by the national office of statistics.
The global financial crisis is ravaging the country, which is highly dependent on constantly declining exports: these dropped by 2.2% in November, the first reduction in seven years, and by 2.8% in December. The fear is that this will continue, leading to the closing of tens of thousands of factories and the loss of millions of jobs. In the last three months, about 560,000 people have lost their jobs according to the official data, but it is believed that the actual number is much higher, because the first and hardest hit are the tens of millions of migrants who work in the underground economy.
In addition to this, the growth of 6.8% is in comparison to the same period in 2007: this means that, since September 30, 2008, in the fourth quarter the economy was stagnant, or even contracted.
The drop in exports also has consequences on the economy of the entire Asia-Pacific region, since Chinese demand for raw materials and components is falling, worsening the crisis in Japan and leading Taiwan, South Korea, and Australia closer to recession.
The crisis is also affecting consumption, and in December the index of consumer prices fell by 1.2%, when in February of 2008 it had grown by 8.7%, leading experts to say that inflation was the greatest threat to the Chinese economy.
Also in 2008, industrial output grew by 12.9%, compared to 18.5% in 2007, but it was up only 5.7% in December compared to the same month the previous year.
Economist Lu Zhengwei of the China Industrial Bank in Shanghai maintains that deflation will continue in the next few months, and that China will not be able to reach a growth rate of 8% in 2009: this is the target set by the government, in part because - the experts say - a lower rate of growth would cause a steep rise in unemployment, with the consequent risk of social protests among the population lacking public unemployment assistance and an adequate system of social security. Citigroup expects growth of 7.6% in 2009, JPMorgan forecasts 7.2%, and the Daiwa research institute is calling for just 6.3%.
Wang Tao, an expert in Beijing, tells the agency Bloomberg that at least 10 million people who work in factories that make products for export risk losing their jobs, as well as 5 million construction workers (housing prices in the big cities dropped by 20% in 2008).
Shanghai is also in crisis, having grown by only 9.7% in 2008, the lowest rate since 1992. Maritime trade grew by 17.7%, compared to 26.7% in 2007, and industrial output was up by 8.3%, compared with 12.6% the year before.
Mei Xinyu, an expert at the commerce ministry, tells the South China Morning Post that "Shanghai provides a vivid example that China's faltering economy won't survive unless it shifts its growth model."
This situation prompted prime minister Wen Jiabao to say recently that 2009 will be "the most difficult year for the mainland's economic development so far this century."
The government has announced investments totaling 4 trillion yuan, reduced export taxes, cut taxes and subsidies for 10 industrial sectors like steel and automobiles, asked the state-run banks to approve more loans, and taken many other initiatives to support the economy. But Wang Qing, an economist for Morgan Stanley in Hong Kong, says that it will take months before these measures produce any tangible results, and he expects growth between 3 and 4 percent in the first quarter of 2009. Other experts expect a lower rate of growth, observing that the country has an exceptional capacity surplus, and worldwide demand for its products could fall even more.