Asian economic woe grows as China slows and Japanese exports plunge

Asian economic woe grows as China slows and Japanese exports plunge

China's economy may have ground to a halt entirely between the third and fourth quarters of last year and Japanese exports plunged 35pc in December, underlining the scale of the slowdown in Asia.

By Malcolm Moore in Shanghai
Last Updated: 7:39AM GMT 22 Jan 2009

China's national statistics bureau said gross domestic product had grown at an annual rate of 6.8pc in the fourth quarter of 2008, compared to a gain of 9pc in the previous three months.
The annual rate of growth for the world's third-largest economy was the lowest since the second quarter of 1998. "The international financial crisis is deepening and spreading with a continuing negative impact on the domestic economy," said Ma Jiantang, head of the statistics bureau.
Although the annual rate of growth was 6.8pc, economists speculated that the actual growth between September and December last year could have been zero, or even negative.
"My rough assumption is that it was basically zero," said Stephen Green, an economist at Standard Chartered bank in Shanghai. However, he added, recent revisions to Chinese GDP figures made an accurate calculation impossible. Mr Green also predicted that GDP may not grow in the first quarter of this year, compared to the last quarter.
Japanese exporters endured a torrid December as demand for a range of goods fell sharply. Exports to the US fell 26pc, those to Europe dropped 41.8pc and those to China were down 35pc.
In China, much of the slowdown has been blamed on a lack of demand from the rest of the world for Chinese-made goods. Wen Jiabao, the prime minister, said earlier this week that the outlook for Chinese employment is "very grim" as factories shut down and foreign companies rein in their spending.
Mr Wen will visit the UK next week, and Gordon Brown has already called upon him to make sure that China plays its part in stabilising the global economy. "We need China to play a full role, in partnership with us, if we are to restore confidence, growth and jobs," said Mr Brown.
China, however, has insisted that it must get its own house in order first, and there are indications that the government has already instructed banks to unleash credit into the market. The value of loans issued in November and December soared by nearly 19pc.
"It is hard to overestimate the potential importance of this," said Mr Green. "Mature economies' banking systems are currently flooded with liquidity that is not being lent out. China's interbank market is similarly flooded, but the difference is that the banks are lending."
The banks are likely to be ordered to finance a large chunk of the Pounds400 billion fiscal stimulus package that the Chinese government announced in November. There is a further Pounds2 trillion of spending demands from local governments across China that they may also be called upon to help with, irrespective of the possibility of bad loans.
Other bright spots included a slight rebound in industrial production growth to 5.7pc in December from 5.2pc in November, and a strong set of retail sales figures, where growth was 19pc.
Goldman Sachs, which issued one of the most bearish predictions for Chinese economic growth in 2009, at 6pc, admitted that there are "rising upside risks" that they may be incorrect, given the money flooding into the market.
"Our checks with commercial banks suggest the value of loans extended in January is likely to be even larger than the amount in December," said Yu Song, an economist at Goldman, adding that falling inflation also raised the possibility of further interest rate cuts.
However, Goldman said that China could be hit by even weaker export demand and maintained its prediction for now. "It is way too early to even claim the worst is over," said Mr Green. "Exports and domestic consumption, as well as profit growth, are now slowing and they will continue to grind lower over the year. Property still looks fragile, as does private investor sentiment. Even if we reach 8pc growth for this year, it will not feel like it," he added.


http://www.telegraph.co.uk/news/worldnews/asia/china/4312120/Asian-economic-woe-grows-as-China-slows-and-Japanese-exports-plunge.html