The laid-off factory workers and slumping car sales indicated China's booming economy was not immune to the global meltdown. New figures confirm it: China's economy is still growing, but at the slowest pace in five years.
The National Statistics Bureau said Monday the economy expanded by just 9 percent in the third quarter, the slowest rate since 2003, when growth plummeted during the SARS outbreak. By comparison, the economy grew 10.6 percent in the first quarter and 10.1 percent in the second quarter of 2008.
China's State Council has begun drafting measures to counter the slowdown, including export tax rebates on labor-intensive products, such as clothing, as well as on electronics and small appliances. They also promised more support for the ailing housing sector and money to rebuild areas devastated by the May earthquake, state-controlled media said Monday.
After years of feeding a voracious global appetite for its exports, China is seeing demand dry up as consumers in the U.S. and Europe cut back on spending in the wake of the mortgage-debt meltdown. The shift is a serious challenge for Beijing leaders as they struggle to keep job-creating growth on an even keel.
Protests by laid-off workers demanding their paychecks have already erupted as thousands of factories fold under the pressure of rising costs and slowing orders. Affluent city dwellers are feeling the pinch of sinking share prices and a weak housing market – sales of passenger cars fell 6.2 percent in August from a year earlier, according to the China Association of Automobile Manufacturers.
Exports have just begun to slow – the trade surplus hit a monthly record $29.3 billion in September as costs for imports eased thanks to lower prices for crude oil and other commodities.
A weaker China spells trouble for other Asian countries that have thrived on robust sales of raw materials and other manufacturing inputs to their giant neighbor.
“The problem is that China's economic growth is slowing down when it is most needed,” said Huainan Zhao, a banking expert at Cass Business School in London.
Instead of bouncing back after a lull during the Beijing Olympics, China's industrial boom has slowed further, with output growing 11.4 percent year-on-year in September. That compares with 12.8 percent in August.
Still, there are glimmers of good news.
Inflation slowed in September, the bureau said, to a 15-month low of 4.6 percent.
For Beijing, that means the effort spent on reining in bank lending and keeping inflation in check can now be refocused on keeping growth steady.
“The single important policy goal is growth, and the government will rapidly roll out fiscal, credit and trade policies to achieve this goal,” investment bank Merrill Lynch said in a research report released Monday.