Used to double-digit growth, China could see pace sink to 5% in 2009 from 9.7% this year, says IMF
Reuters 16 December 2008
(LONDON) The International Monetary Fund said yesterday that Chinese growth could almost halve next year as a global downturn sucks in the biggest emerging economy in the world.
Managing director Dominique Strauss-Kahn told a conference that growth in China, the world’s fourth biggest economy and accustomed to double-digit growth rates, could fall to 5 per cent next year from 9.7 per cent this year.
‘We started with China at 11 per cent growth, then eight, then seven, then China will probably grow at 5 or 6 per cent,’ he told a conference in Madrid. ‘The possibility of a global recession is real, we realise something must be done.’
He said that the world needed stimulus measures of around 2 per cent of its GDP - US$1.2 trillion - to reduce the risk of a damaging global recession, and that the global financial sector must share wealth around more broadly.
‘If we are not able to do that, then social unrest may happen in many places, including advanced economies.
‘The good news, with some exceptions, maybe a lot of exceptions - we can see the beginning of the recovery at end of 2009, beginning of 2010, but there are a lot of downside risks.’
China, in particular, fears unrest if growth falls below the 8 per cent it says it needs in order to create enough jobs for the millions of people moving to cities from the countryside.
At the same time, China said yesterday that its industrial output grew at the slowest pace since 1999 while Japan reported its sharpest crash in business sentiment in three decades, adding to evidence that a global downturn would last through next year.
China’s annual industrial output growth slowed to 5.4 per cent in November - the weakest figure in at least nine years for a non-holiday month and down from 8.2 per cent in October.
‘Five per cent GDP growth in the first half next year is now a reality, not a risk,’ said Ben Simpfendorfer, strategist with Royal Bank of Scotland in Hong Kong. ‘There’s little doubt the data will look ugly over the next six months.’
China President Hu Jintao was quoted by Xinhua as saying: ‘Next year’s employment market will be very serious, affected by the international financial crisis.’
While markets looked for more state support for the global economy, European Central Bank president Jean-Claude Trichet urged European policymakers not to tear up eurozone rules on public deficits and debt levels when launching rescue packages.
Fiscal indiscipline could threaten already fragile economic confidence and increase the nervousness of capital markets about governments’ funding needs, he told the Financial Times.
Adding to the gloomy outlook, World Bank president Robert Zoellick said yesterday that the world economic slowdown and financial crisis could lead to protectionism, which could seriously affect China and cause higher global unemployment.
‘In my discussions in Beijing, I drew special attention to this because trade has been very important for China’s development and protectionism could hit China very hard,’ Mr. Zoellick said. ‘At a time of crisis, it is often the vulnerable who are hardest hit and have the least cushion.’
China’s exports fell for the first time in seven years in November, imports plunged and producer and consumer prices cooled, adding to evidence that recession in the US, Europe and Japan is driving the world’s fourth-largest economy into a slump.
‘It will be important for China to maintain the openness of its markets,’ said Mr. Zoellick, who arrived in China on Dec 13 for a four-day visit and met with Premier Wen Jiabao earlier yesterday.
The World Bank cut on Nov 25 its forecast for China’s economic growth next year to 7.5 per cent from 9.2 per cent earlier after the global financial crisis deepened.
‘At the meeting of the G-20 heads in Washington, I emphasised that a deal was more important than before because with the slowdown we could see signs of protectionism,’ said Mr. Zoellick. ‘It’s been unfortunate that a possible (Doha) deal has been slipping away.’
World Trade Organization director-general Pascal Lamy on Dec 12 abandoned plans to hold a meeting of ministers to clinch a trade deal by the end of the year, saying that there’s no consensus among major governments.
Asian markets rallied yesterday, buoyed by expectations that the White House would step in to prevent the collapse of the Big Three US carmakers. But bleak forecasts from European carmakers and the fallout from the Bernard Madoff Ponzi scam held back European and US stocks.
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World braces for 5% ‘uncharted’ China growth
Used to double-digit growth, China could see pace sink to 5% in 2009 from 9.7% this year, says IMF
Reuters
16 December 2008
(LONDON) The International Monetary Fund said yesterday that Chinese growth could almost halve next year as a global downturn sucks in the biggest emerging economy in the world.
Managing director Dominique Strauss-Kahn told a conference that growth in China, the world’s fourth biggest economy and accustomed to double-digit growth rates, could fall to 5 per cent next year from 9.7 per cent this year.
‘We started with China at 11 per cent growth, then eight, then seven, then China will probably grow at 5 or 6 per cent,’ he told a conference in Madrid. ‘The possibility of a global recession is real, we realise something must be done.’
He said that the world needed stimulus measures of around 2 per cent of its GDP - US$1.2 trillion - to reduce the risk of a damaging global recession, and that the global financial sector must share wealth around more broadly.
‘If we are not able to do that, then social unrest may happen in many places, including advanced economies.
‘The good news, with some exceptions, maybe a lot of exceptions - we can see the beginning of the recovery at end of 2009, beginning of 2010, but there are a lot of downside risks.’
China, in particular, fears unrest if growth falls below the 8 per cent it says it needs in order to create enough jobs for the millions of people moving to cities from the countryside.
At the same time, China said yesterday that its industrial output grew at the slowest pace since 1999 while Japan reported its sharpest crash in business sentiment in three decades, adding to evidence that a global downturn would last through next year.
China’s annual industrial output growth slowed to 5.4 per cent in November - the weakest figure in at least nine years for a non-holiday month and down from 8.2 per cent in October.
‘Five per cent GDP growth in the first half next year is now a reality, not a risk,’ said Ben Simpfendorfer, strategist with Royal Bank of Scotland in Hong Kong. ‘There’s little doubt the data will look ugly over the next six months.’
China President Hu Jintao was quoted by Xinhua as saying: ‘Next year’s employment market will be very serious, affected by the international financial crisis.’
While markets looked for more state support for the global economy, European Central Bank president Jean-Claude Trichet urged European policymakers not to tear up eurozone rules on public deficits and debt levels when launching rescue packages.
Fiscal indiscipline could threaten already fragile economic confidence and increase the nervousness of capital markets about governments’ funding needs, he told the Financial Times.
Adding to the gloomy outlook, World Bank president Robert Zoellick said yesterday that the world economic slowdown and financial crisis could lead to protectionism, which could seriously affect China and cause higher global unemployment.
‘In my discussions in Beijing, I drew special attention to this because trade has been very important for China’s development and protectionism could hit China very hard,’ Mr. Zoellick said. ‘At a time of crisis, it is often the vulnerable who are hardest hit and have the least cushion.’
China’s exports fell for the first time in seven years in November, imports plunged and producer and consumer prices cooled, adding to evidence that recession in the US, Europe and Japan is driving the world’s fourth-largest economy into a slump.
‘It will be important for China to maintain the openness of its markets,’ said Mr. Zoellick, who arrived in China on Dec 13 for a four-day visit and met with Premier Wen Jiabao earlier yesterday.
The World Bank cut on Nov 25 its forecast for China’s economic growth next year to 7.5 per cent from 9.2 per cent earlier after the global financial crisis deepened.
‘At the meeting of the G-20 heads in Washington, I emphasised that a deal was more important than before because with the slowdown we could see signs of protectionism,’ said Mr. Zoellick. ‘It’s been unfortunate that a possible (Doha) deal has been slipping away.’
World Trade Organization director-general Pascal Lamy on Dec 12 abandoned plans to hold a meeting of ministers to clinch a trade deal by the end of the year, saying that there’s no consensus among major governments.
Asian markets rallied yesterday, buoyed by expectations that the White House would step in to prevent the collapse of the Big Three US carmakers. But bleak forecasts from European carmakers and the fallout from the Bernard Madoff Ponzi scam held back European and US stocks.
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