China aims to be first to recover from global financial crisis

China's Premier Wen Jiabao said over the weekend that his country would be the first to recover from the global financial crisis and would come out with more measures in the coming months to prop up the sagging economy even as China's Banking Commission warned yesterday that it will be exceptionally difficult for China to meet its 8-per cent growth target in 2009.

On a weekend tour to Jiangsu province, seen as the export powerhouse of China but been hit badly by the global economic downturn, Premier Wen Jiabao said "Our aim is to be the first to recover from the financial crisis. We must have faith and determination,'' the China Daily reported.

He also said that the country's top policy makers are working out draft plans of new economic measures to help nine industrial sectors, which have been hit hard by the global economic crisis and this new policy will be put before the National People's Congress that is scheduled to start on 5 March.

As China's economy grew by just 9 per cent in the third quarter of last year, the smallest growth posted since the mid-2003, policymakers have used positive fiscal and fairly loose economic policies to give a thrust to the economy.

Wen said the $88-billion investment in six major projects country's master plan for scientific and technological development would be accelerated by the government.

The six major project details were not disclosed by Wen, but the project master plan, which was announced in 2006 included 16 scientific and technological schemes that were supposed to be completed by 2020 and among them, was the development of the locally built jumbo passenger aircraft and the manned space programme.

With more than 600,000 migrant workers from the manufacturing zone of Guangdong returning home jobless and with urban unemployment rate of more than 9 per cent, Chinese economists warn that the country may not be able to achieve its growth target of 8 per cent, which could result in social unrest in the hinterland.

According to them, the Chinese economy grew by 9 per cent in the third quarter and may grow at a slow pace of 5 per cent this year as recession hit US, Japan and Europe cut demand for toys, clothes and electronics, compared to 11.9 per cent in 2007.

China's stimulus
In November, the world's fourth-largest economy, announced a massive $586 billion stimulus package to boost its economy and stimulate growth, (See: China pumps $586 billion to bolster economy) and the package is to be used over a period of two years and focus on 10 areas of economic and social development including extra infusion of money in low-cost housing allover the country, spending on rural infrastructure, increased spending on roads, railways and modernising airports as well as spending on education, health, environmental protection, technical innovation and mergers and acquisitions.

Wen said that "Our measures have already taken effect'' and added that the economic data for December was "better than expected," reported the China Daily.

The world's largest maker of giant excavators, Hitachi Construction Machinery Co has announceda freeze on its $1-billion investment to expand production in China and other emerging markets due to the global economic downturn.

Hitachi had planned to expand its capacity by 25 per cent with a 100 billion yen investment spread over two years in China but the excavator market declined by 50 per cent in November and 37 per cent in December and the company feels that the $586 billion stimulus package announced by the Chinese government in November is not likely to make any impact in the near future as company officials had hoped.

China's exports declined 2.2 per cent year-on-year to $115 billion in November - the first monthly fall since June 2001, reflecting the slump in US demand after the financial bubble burst. (See: China's exports down 2.2 per cent in November)

In Dongguan, an export hub near Hong Kong, thousands of workers have remained unpaid or have lost their jobs as the toy factories battle the downturn overseas. The local government had to intervene and give $3.5 million to the employees of Smart Union, which sold toys to Mattel, Disney and Hasbro, where 7,000 workers went on strike after losing their jobs due to the closure of the company.

Export orders for the Christmas season had fallen drastically by 20 per cent as big retailers in the US, UK and Europe report of a dramatic slump in sales.
Southern China, which had boomed due to the thriving manufacturing industry churning out electronics, clothing, toys and furniture and exported to the US, saw the worst decline as the global slowdown saw export orders plummeting and rising raw material and labor costs increasing.

China's industrial output growth dropped for the fifth straight month, to 5.4 per cent year-on-year in November – the slowest in nine years - the National Bureau of Statistics (NBS) said. (See: China industrial output growth hits a 9-year low in November)

The growth rate was down 2.8 percentage points from October and 11.9 percentage points lower than a year earlier, as manufacturing output slumped with a drop in export demand and the property market slumped, according to the NBS.

Declining production
Industry wise, output for raw chemicals and chemical products fell 3.3 per cent in November.

Production of coal and crude oil were down 5.2 per cent and 4.9 per cent respectively at 230 million tonnes and 15.86 million tonnes, respectively and power generation fell 9.6 per cent in November against a four per cent fall in October.

Vehicle sales in China, the world's second-largest car market, slowed to 6.7 per cent in 2008 after a continuous double-digit growth in the past five years, as the global economic slowdown had an impact on the Chinese car industry. (See: China's auto sales post slowest growth in a decade) 

The 9.34 million vehicles produced last year by Chinese car makers, while up by 5.21 per cent, was still the Chinese auto industry's slowest growth in 10 years, against sales and production targets of 10 million units.

The National Development and Reform Commission, the country's top planning body, is now working on a policy for the auto sector where it will remove road tolls and is likely to come with other measures to boost consumer confidence such as dropping sales tax on vehicles with engines of less than 1.6 liters and credit incentives. to increase the sale of vehicles.

China will accelerate investments in key technology sectors as part of a  new stimulus package to help the economy recover faster, state radio reported citing statements by prime minister Wen Jiabao. (See: China to speed up technology spending to stimulate economy)

The new investments is aimed at boosting the economy by speeding up some recently announced projects ahead of the annual National People's Congress, scheduled for March, media reports said.

China's Banking Commission warned yesterday that it will be exceptionally difficult for China to meet its 8 per cent growth target for 2009 and it will create more unemployment resulting in social unrest.

 The OECD's gauge of "Leading Indicators" which warns of economic trends in advance has said that the index for China has fallen by 3.1 per cent and the central bank, which  has cut interest rates fives times in the past three months was of little help.

 According to economists, 40 per cent of China's GDP is spent on business investment, thereby creating huge surplus capacity and it not viable to build factories at this pace and predict a growth rate of a modest 5 per cent, which is bad news for the global economy.