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2008-12-17 | All chapters

China's output growth slumps
Jamil Anderlini, Financial Times, 16th December 2008

The growth of China's industrial output fell to a fresh low in November, providing further proof that the country's economy has been hit more severely by the global economic crisis than anticipated.

Industrial production growth dropped to 5.4 per cent, down from 8.2 per cent in October, as exports fell by the biggest margin in nearly a decade and the real estate sector continued to decline, according to figures released yesterday.

"Excluding holiday-related distortions, this is the weakest result since the series first began in 1994," said Ben Simpfendorfer, an economist for Royal Bank of Scotland in Hong Kong. "As a result, 5 per cent [gross domestic product] growth in the first half of 2009 is now a reality, not a risk."

The latest data to add to the gloom on the state of the Chinese economy emerged as Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said in Madrid that next year "China will probably grow at 5 or 6 per cent".

Heavy industry saw the biggest contraction in November, particularly in sectors that make materials for building. Steel production fell 12 per cent last month.

The governing State Council released a "30-point plan" over the weekend calling on the central bank and state-owned lenders to do everything in their power to avoid a pronounced slowdown and deflation. The plan set a monetary growth target of 17 per cent in 2009, which would boost money supply by Rmb7,700bn ($1,100bn, €827bn, £740bn) and provide a flood of liquidity aimed at ensuring the economy can grow by the government's target of 8 per cent, according to Qu Hongbin, an HSBC economist in Hong Kong. The plan also promised regulatory relief for the beleaguered stock market and further credit support measures for first-time homebuyers and the real estate sector.

"The best thing China can do [about the global slowdown] is maintain policies that support its own growth," said Robert Zoellick, the World Bank president, yesterday in Beijing. "China has already taken some important steps."