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Gloom persists as China's factory output, retail sales slow

by Staff Writers
Beijing (AFP) March 12, 2009
China on Thursday said factory output and retail sales were slowing, but banks were also pumping more credit into the economy as the country battles the global downturn.

Industrial production in the world's third-largest economy grew 3.8 percent in the first two months of 2009 compared with the same period last year, the National Bureau of Statistics reported.

It was a sharp slowdown compared with the 15.4 percent year-on-year growth recorded in the first two months of 2008, according to earlier data from the statistics bureau.

"Downsizing has now become a widespread phenomenon," said Sherman Chan, an analyst with research firm Moody's Economy.com. "Thus, industrial output is expected to be lacklustre during this challenging year."

Growth in Chinese retail sales also weakened in the first two months of the year, government data showed Thursday, indicating that consumer confidence had taken a beating.

Retail sales, a main measure of consumer spending, were up 15.2 percent in the first two months of 2009, compared with 20.2 percent in the same period last year, the National Statistics Bureau said.

"Both industrial output and retail sales are certainly very weak, and industrial output in particular is much weaker than expected," said Peng Wensheng, a Hong Kong-based economist with Barclays Capital.

"This points towards basic near-term weaknesses remaining in the economy," he said.

China is targeting eight percent growth in 2009 -- seen as necessary to keep joblessness at a level that would avoid major unrest -- but with 6.8 percent growth in the fourth quarter of 2008, it could be hard to achieve.

Thursday's figures came on top of other data released this week that nearly all painted a bleak picture of the impact the global crisis was having on China's economy.

Most strikingly, customs authorities reported on Wednesday that February exports were down 25.7 percent from the same month a year ago.

Chinese authorities are hoping a pick-up in domestic demand will offset the export woes.

While the factory and consumption statistics seemed to leave little hope for a speedy domestic pick-up, central bank figures showed the nation's banks were busy trying to boost demand at home.

New loans in China hit nearly 1.1 trillion yuan (160 billion dollars) last month, the central bank said, indicating banks continued to heed a government call for stepped-up credit.

The figure was larger than expected -- local media had predicted 800 billion yuan in new loans -- and followed the 1.6 trillion yuan in new lending extended in January.

In a sign that this money was now being put to use, China reported on Wednesday a huge increase in mostly government-funded investment in productive capacity -- arguably the only piece of bullish news this week.

Spending on fixed assets in January and February in Chinese cities surged 26.5 percent in January and February compared with the same two months a year ago, the National Bureau of Statistics said.

The figure was even higher than the 24.3 percent growth in fixed asset investment registered for the first two months of 2008, long before the crisis attained global dimensions and started threatening China.

"The industrial sector may have breathed a sigh of relief after seeing the stronger-than-expected fixed asset investment data released earlier this week," said Chan of Moody's Economy.com.

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Walker's World: EU row looms for G20
Paris (UPI) Mar 10, 2009
The total loss of wealth of the world's financial crisis over the last 18 months has now topped $50 trillion. The Asia Development Bank estimated this week that more than $33 trillion has disappeared in lost stock market prices and another $17 trillion (and probably more) in falling real estate values.







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