China's Economy Slows To 6.8 Percent Last Quarter
RENEE MONTAGNE, host:
Moving to China, Beijing today announced that its economy grew almost seven percent in the last quarter of 2008 and nine percent for the entire year. It sounds amazing, but in China, that's considered bad news. We called NPR's Louisa Lim in Shanghai to talk about why this is seen as such a problem. Good morning, Louisa.
LOUISA LIM: Good morning, Renee.
MONTAGNE: Why is this a problem? Here in the U.S., of course, we would be thrilled with the growth of even two or three percent.
LIM: Yes. Nine percent growth might sound like a lot, but let's put it in context. That's the slowest pace of growth in seven years, and it compares to economic growth of 13 percent in 2007. I asked an economist, CLSA's China strategist Andy Rothman, what to make of these latest figures, and this is what he had to say.
Mr. ANDY ROTHMAN (Strategist, CLSA): There was a significant slowdown. The GDP growth rate in the quarter that just finished was 25 percent slower than the previous quarter and at least 40 percent slower than the same period in 2007. But at the same time, it really wasn't too bad, especially if you compare it to the other two countries in Asia that have released their fourth quarter data. Both those showed contraction, negative GDP growth, in Korea and Singapore.
LIM: That was Andy Rothman of CLSA. Now, China's target is eight percent GDP growth for this year, but already, just three weeks into the new year, Chinese officials are warning that it could be extremely difficult to hit that target.
MONTAGNE: So, why does that eight percent mean so much there? I mean, your economist there just suggested that China's doing better than its neighbors, South Korea and Singapore.
LIM: Yes, but eight percent is the government growth target that's been repeated so much that it's acquired almost this sort of talismanic significance. And that's because a certain amount of growth is necessary to absorb the new entrance into the workforce. And I mean, one Chinese think tank has warned that unemployment in urban areas could be as high as 9.4 percent. So, having large numbers of dissatisfied, unemployed people obviously increases the risks to social stability, and we have seen a few small-scale labor protests already. And the most pessimistic predictions are saying there could be a threat to Communist Party rule, something which could have been barely imaginable just a couple of years ago.
MONTAGNE: So, how aggressive is the government in trying to tackle this?
LIM: Well, the government is trying very hard to kick-start the economy. They've announced this huge stimulus package of $586 billion. They've announced subsidies for steel and auto sectors, and they're also trying to get Chinese consumers out and spending their money, because there are very high savings rates in China. So, there are a huge range of measures in place, and economists say they are beginning to see a few signs of hope. Bank lending, for example, is up 1,000 percent in December. But still, there are these warnings that the year ahead, and particularly the first half of this year, could look quite dicey.
MONTAGNE: You know, Louisa, just finally, is there any kind of silver lining in this? I mean, there were economists over the recent years that have said China is growing too fast.
LIM: This is a slowdown, but it's a much faster slowdown than the soft landing China had been hoping for, and some have described it like falling off the edge of a cliff. And of course, when you have a very fast-paced contraction, that does bring lots of risks and it brings pain for ordinary people. I've just interviewed a local couple who just bought a flat for $200,000, and then over the next 30 days, they watched it lose value, and it lost about $1,000 a day. I mean, that's an awful lot of money. It is likely to be a painful year for China, and of course, that has global implications. When China suffers, it drags down growth across Asia, and ultimately, it will slow down the pace of economic recovery worldwide.
MONTAGNE: NPR's Louisa Lim speaking to us from Shanghai. Thanks very much.
LIM: Thank you, Renee.
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