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Thread: The Economy Slowdown Continues in China

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[quote=CHINASTOCKADVICE,347802]By Kofi Duan 
Source: www.chinastockadvice.com 
Updated: Dec 18, 2008

The speed and intensity of the global recession evolution is beyond many people’s imagination.

China’s economy is influenced more greatly by this financial crisis. This judge is based on the following three reasons. Firstly, the import and export has a great proportion in China’s GDP, 6.8% and 8.7% respectively, as a result, the decrease of the external demand has a great downside pressure on China’s GDP increase; secondly, the real estate industry in China is in its downturn now, which gives larger pressure on China’s economy growth. Real estate is one of the pillar industries in China; it has some 40 relevant industries and absorbs millions of employment workers. Thirdly, for the past 30 years, China’s economy growth follows an imbalanced path, and now this path seems difficult to continue.

China’s GDP growth is 9% in this third quarter, and it’s estimated that it’s under 8% in the last quarter of 2008. Other data gives more pessimistic pictures. According to National Bureau of Statistics figure released on Dec 16, 2008, value-added of industrial enterprises above designated size (i.e. all state-owned enterprises and those non-state-owned enterprises with an annual sales income over Rmb5mn ) grew 5.4% year on year, the lowest point since 1998.

The unemployment is some 11 million now, meanwhile, millions of students flushed in the labor market. There would be 6.1 million students graduating from colleges and universities, adding those who were graduated before but are still searching for a job, this amount comes to 10 million. The situation is serious now. If the economy cannot see a rebound next year, the unemployment would increase continuously.

China seeks to depreciate RMB to increase its exports. The depreciation would have little effect but deteriorate China’s trade conditions. The decrease of exports is because of the great decrease inthe purchasing power of external world. In fact, China’s exported goods are cheap enough from the past to now.

The economy is slowing down now, an atmosphere of anxious spreads in China. Government has released many policies to rescue the economy, but it needs time, and it depends on many other factors, such as whether the policy can retrieve people’s confidence, and then stimulate the internal demand. The real estate is the biggest internal demand market, it’s estimated that the government would firstly try to start it up.

Christmas Day is only one week away, then comes the New Years’ Day, and several weeks later, is China’s biggest festival, i.e.the spring festival. The financial crisis and the economy slowdown would shadow the festivals inevitably. Many are expecting a more difficult year in 2009.

Please contact China Stock Advice for any inquiries. Reproduction in whole or in part without China Stock Advice's permission is prohibited.

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