bllomberg article. looks ok to me with more monetary stimulus via interest rate cuts (forecast to cut 3 more time by end of 2009).
China's Economic Growth Cooled to 9.9% in First Nine Months
By Kevin Hamlin and Li Yanping
Oct. 20 (Bloomberg) -- China's economic expansion cooled in the first nine months, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.
Gross domestic product grew 9.9 percent from a year earlier, the statistics bureau said today in Beijing. That was down from 10.4 percent in the first half.
China may cut interest rates for the third time this year after weaker export orders and factory closures for the Olympic Games damped industrial output. The nation will raise investment in infrastructure and boost export-tax rebates to protect the economy from the increasing risks posed by the financial turmoil, the cabinet said yesterday.
``There are no options for the Chinese government except to stimulate the economy -- more monetary easing is needed,'' said Sherman Chan, an economist with Moody's Economy.com in Sydney. She predicts five rate cuts by mid-2009 and the abolition of quotas that limit banks' lending.
Inflation cooled to 4.6 percent in September from 4.9 percent in August. The nine-month economic expansion is 2 percentage points slower than the pace for all of 2007.
China's efforts to boost growth are of ``critical importance to the global economy,'' Australian Prime Minister Kevin Rudd said last week. The nation is the world's biggest consumer of metals and grains and underpins demand for exports within Asia, where economies are stalling.
Investment, Industrial Output
Urban fixed-asset investment climbed 27.6 percent in the first nine months from a year earlier, after a 27.4 percent increase through August, today's data showed.
Industrial production rose 11.4 percent in September after climbing 12.8 percent in the previous month. Retail sales increased 23.2 percent, matching the gain in August.
The State Council said yesterday that ``unstable factors in the international economic environment are clearly increasing, and the impact is gradually showing on China.'' Signs include slower growth in fiscal revenue and company profits and ``volatility and sluggishness'' in stocks, it said.
Rio Tinto Group, the world's second-largest aluminum producer, last week flagged ``significantly weaker'' demand for the metal in China. Prices for Chinese imports of iron ore also fell to a 19-month low on cooling demand from steelmakers.
`Zero' Export Growth
About half of China's toymakers have shut down this year, with 7,000 workers losing their jobs in factory closures this month by Smart Union Group Holdings Ltd. in Guangdong province, state media say.
Export growth may plummet from 22 percent in the first nine months of this year to ``zero or even negative growth'' in 2009, according to Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai.
The central bank has stalled gains by the yuan against the dollar since mid-July, protecting jobs in export industries.
Weakness in the property market is also a threat to growth. Home sales by volume plunged 55.5 percent and 38.5 percent in Beijing and Shanghai in the first eight months from a year earlier, the official Xinhua News Agency reported, citing the China Real Estate Association.
The State Council said yesterday that it would increase the supply of low-cost housing and reduce property transaction fees.
The CSI 300 Index of stocks has fallen 66 percent this year.
``The panic in the stock market has spread to the property market,'' said Chan, of Moody's Economy.com. ``Declines in asset prices make people feel less wealthy and they will cut back on consumption and then investment growth will slow.''
A fiscal surplus and a world record $1.9 trillion of currency reserves allow the government to step up spending.
Rapid Response
The International Monetary Fund estimated this month that China's economy may expand 9.3 percent next year compared with growth of 0.1 percent in the U.S., 0.2 percent in the euro area, and 0.5 percent in Japan. China was the biggest contributor to global growth last year, according to the organization.
``In the past China has been successful in responding quite quickly to increase spending, particularly on infrastructure, to offset the decline in export growth,'' Charles Collyns, the IMF's deputy director of research, said Oct. 8.
Easing inflation cleared the way for two interest-rate reductions in a month, the latest on Oct. 8, when the U.S. Federal Reserve and five other central banks also made cuts in an emergency bid to thaw credit markets.
Producer prices rose 9.1 percent last month after the 10.1 percent gain in August that was the biggest since 1996.
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