China economic downturn deepens

China economic downturn deepens


For long life: A group of Chinese chefs show off the art of noodle making in Xian, northern China's Shaanxi province on Wednesday. The Chinese have been feasting on noodles for approximately 2,000 years, dating back to the Han dynasty (206 BC-220 AD). Picture: AFP
SINGAPORE

Friday, November 28, 2008

CHINA yesterday warned its economic downturn was deepening with the spread of the global financial crisis, while a senior European policymaker said woes could extend beyond 2009.

In India, emerging Asia's other economic titan, financial markets were closed after Islamist militants killed more than 100 people in the commercial capital Mumbai.

The violence in Mumbai and the political unrest in Thailand showed that political risk is an extra potential threat to emerging markets reeling from the global crisis.

"These awful events are reinforcing the nervousness about emerging markets, which have been weak any way for some time after the U.S. slowdown and the domino effect," said Justin Urquhart Stewart, investment director at Seven Investment Management in London.

The economic warnings from China's top planner came a day after its central bank cut interest rates by the biggest margin in 11 years in response to the worst global downturn in decades.

China's State Information Centre, a government think-tank, forecast annual growth would slow to eight per cent this quarter from nine per cent in the third quarter, a rapid cooling from double-digit rates recorded in the past five years.

"The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November," Zhang Ping, chairman of the National Development and Reform Commission, told a news conference.

With factories closing by the thousands, Chinese officials have grown increasingly concerned in recent weeks that slowing growth may threaten the stability that the ruling Communist party craves for its 1.3 billion people.

Slowing demand for Chinese exports in the West is curbing growth and there is no relief in sight.

The eurozone is likely to be in recession next year, European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said, reversing a forecast of slight growth made earlier this month.

Almunia would not give a specific forecast for 2009, but said next year may not mark the end of the eurozone's troubles. "The crisis may not end in 2009," he said.

Emphasising the bleak outlook, the eurozone's business climate indicator fell to its lowest in more than 15 years in November, European Commission data showed.

Reuters