Chinese growth at lowest level since crisis began

CHINA’S TRADE growth decelerated sharply in June, prompting fears that the world’s second-biggest economy is slipping despite stimulus efforts, and adding to anxieties about the impact on the global economy.

Import growth fell by half from May’s level to 6.3 per cent, data showed, reflecting weak Chinese consumer and industrial demand, while the crucial export market slipped to 11.3 per cent from May’s 15.3 per cent amid ongoing sluggishness in China’s key European and US markets.

Second-quarter GDP statistics to be released this week are expected to show growth of about 7.5 per cent, which would pitch China’s economic growth at its lowest level since the 2008 global crisis on the back of weak demand for exports and government efforts to cool overheating and inflation.

“Three points leap out from China’s June trade data,” said Mark Williams of Capital Economics. “Exports to the US have taken a sudden turn for the worse, commodity imports have slumped and the trade surplus has returned to the level it was at before the global financial crisis.”

Analysts expect a rebound in the Chinese economy later this year. The government has set an official target of increasing trade by 10 per cent this year but private-sector analysts say growth could be as low as zero.

Premier Wen Jiabao said the government would step up its response to the economy’s slowdown. He said there was still “relatively large” downward pressure on the Chinese economy, which came as unsettling news to China’s neighbours, which are ever more reliant on China to help them counter weakness from Europe and the US.

“In April this year we announced we would put stabilising growth in a more prominent position and we intensified efforts to pre-emptively fine-tune policies,” the Xinhua news agency quoted him as saying.

“Currently these measures have already seen some results and the economic slowdown has stabilised.”

China’s consumer price index rose just 2.2 per cent in June from a year earlier, a 29-month low.

Without the fear of sharp price rises hanging over it, the government has more leeway to give the economy a push. Beijing lowered benchmark interest rates on July 5th for the second time in a month.

China’s slowing demand for oil, iron ore and other foreign goods is bad news for economies that had been looking to relatively strong Chinese growth to help drive global sales.

Analysts will now look to see if new lending proves robust in June, which would indicate that the government’s stimulus package was working, but last week’s fresh rate cut would seem to indicate that the situation remains sluggish for lending.