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China's GDP rise skids at year's end

CHINA'S economic growth slumped sharply in the fourth quarter last year, sending the full-year figure to its worst performance since 2002 as the global financial downturn dampened demand for the country's exports and domestic consumption eased.

"The international financial crisis is deepening and spreading, with continuing negative impact on the domestic economy," said Ma Jiantang, director of the National Bureau of Statistics, which released its year-end economic report yesterday. "The impact of the global crisis has spread from small and medium-sized enterprises to larger ones, from eastern coastal regions to the rest of the country, especially since October."

China's gross domestic product rose 6.8 percent in the three months through December, compared with a 9 percent rise in the third quarter, 10.1 percent in the second and 10.6 percent in the first.

For all of 2008, the national economy expanded 9 percent to 30 trillion yuan (US$4.39 trillion), after rising 13 percent in 2007.

Economic growth showed "an obvious correction" last year, but the full-year performance was still better than in other countries, Zhang Liqun, from the Development Research Center of the State Council, told Xinhua news agency.

He attributed the fourth-quarter weakness to reduced industrial output as inventories piled up amid sharply lower foreign demand.

Economist Wang Xiaoguang said the fourth-quarter ebb was not a sign of a "hard landing," just a necessary "adjustment" from previous rapid expansion.

"This round of downward adjustment won't bottom out in just a year or several quarters but might last two or three years, which is a normal situation," he said.

The weakening economy has already taken a toll on several Chinese industrial giants. Angang Steel Co Ltd, one of the top three steel producers, said on Wednesday that net profit fell 55 percent last year as steel prices plunged.

Many factories have closed in the export-driven southern areas, and estimates of job losses exceed 2 million.

Exports declined for the second straight month in December, dropping 2.8 percent, following a 2.2 percent decrease in November, the first such falloff in seven years.

On the home front, China has been striving to shore up domestic demand through fiscal stimulus measures and an easing of its monetary policy.

The central government earlier announced a 4-trillion-yuan spending package and pledged to boost support for 10 major industries, including auto and steel. It has also pressured state-owned banks to increase lending.

And the central bank has cut interest rates five times and relaxed reserve requirements for commercial banks three times since September.

Policy makers hope the measures will help the country achieve its economic expansion target of at least 8 percent this year.

Economic restructuring won't happen quickly, however.

"While China's policy makers have sought to reorient economic growth from trade to consumption, the adjustment of consumer spending patterns will not happen overnight," Jing Ulrich, JP Morgan & Co's chairwoman for China equities, said in a report.

China's stimulus depends on persuading consumers to spend more. Analysts said that will be tough to achieve while families still feel the need to save up to 50 percent of their incomes to pay for health care, education and other necessities.


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