China’s economy grew at its slowest pace in five years in the third quarter. Latest numbers from the Statistics Bureau show 9% growth in the quarter, down from 10.1% growth in the previous three months and below expectations (consensus forecast was 9.7%).
Weak export orders and factory furloughs for the Olympics depressed the growth in industrial output, but the underlying concern is that the global financial crisis is pushing China’s key European and American export markets into recession. Stephen Green, Shanghai-based head of China research at Standard Chartered told Bloomberg that export growth may fall from 22% in the first nine months of this year to “zero or even negative growth” in 2009.
The question is whether China is on the verge of a much sharper slowdown in growth, which would undermine global growth prospects. The policy response from Beijing will be a third cut in interest rates for the year, more public spending on infrastructure, particularly railways (which need it), and more export-tax rebates, all to stimulate the economy. The relatively tight fiscal policies adopted earlier this year to control inflation will be eased back.