China's Days of Double-Digit Growth Could Be Over

After growing at an unprecedented rate over the last few years China may face a significant downturn in 2009. In fact, with GDP growth decelerating to 7%, the coming slowdown may be one of the sharpest since the start of the economic reforms 30 years ago.

Exports which accounts for about one-third of economic output, have tumbled 13% in the fourth quarter. However, China's economy may suffer severely not only from declining exports but also from a weakening domestic demand. For example, the ongoing deterioration in imports growth doesn't mean anything good for the economy because China imports a lot of components, assembles them and sends them to other countries. So the softening in imports growth may be an indicator of further drop in exports. Moreover, with deteriorating exports, industrial production growth is slowing down and factories are reducing the workforce which is causing a sudden rise in unemployment.

Anna Fedec,
1/19/2009 3:43:49 PM