World’s fastest growing economy unable to avoid downturn
According to the National Bureau of Statistics, China’s Gross Domestic Product (GDP) expanded by 9% in the third quarter of the year, down from 10.1% in the second quarter.
While this is still regarded as strong compared with other leading economies, the figure is below analysts expectations and is the first time GDP growth has fallen below the 10% mark in nearly three years.
Li Xiaochao of the Bureau said the impact of the global financial crisis had far exceeded the Government’s expectations and added that there are no signs of a definite recovery from the financial crisis.
The growth rate of the global economy has slowed down considerable and there are more uncertain and volatile factors in the international economic climate. All these have started to release their negative impact on China’s economy, added Mr Li.
Meanwhile, the country’s toy-making industry is under pressure. The Government said last week that half the country’s toymakers had gone bust. Over 6,000 employees lost their jobs when Smart Union, a major toy manufacturer in Dongguan, closed blaming a fall in demand from America. Furthermore, Chinese factories are reporting a severe downturn in export orders.
In addition, house prices are down, the stock market has lost ground and car sales have slowed considerably. As with other economies, consumers are cutting back on spending as they believe tougher times lie ahead.
Since mid-September, the People’s Bank of China has cut interest rates twice and reduced banks’ required reserves. Many believe a third interest rate cut is on the cards.