China Economic Forecast as world trade projected to fall

World Trade Projected to Fall: China's Updated Situation

The World Bank's forecast released early December 2008 predicts that world trade would fall in 2009 and capital flows to developing countries are predicted to plunge 50 %. The bank forecast the global economy would only show growth of 0.9 % in 2009, down from 2.5 % in 2008 and 4 % in 2006. The loss of capital will sharply constrict investment in emerging-market economies, the report said. Developing countries will grow an average of 4.5 % in 2009, which is a pace that economists said constituted a recession as these developing economies often have large number of new workers they must absorb each year. Mr. Hans Timmer, Director of the bank’s international economic analysis and projections predicted that rising joblessness and closed factories in many developing countries would characterize 2009. He said in the press conference that it did not take negative growth in developing countries to have a situation that feels like a recession.

China

Even though China’s foreign direct investment(FDI) levels still showed an increase of 26.3 % during the first 11 months of 2008, compared with the same period in 2007, the growth rate was lower than the 35.1 % increase during the first 10 months of 2008. FDI in November 2008 totaled US$5.3 billion, down 36.5 % from the previous year. China’s industrial growth slowed to 5.4 % in November, down 11.9 percentage points from the 2007 figure, China Daily reported. Figures for November were the weakest showing in seven years.

The World Bank report said that China grew 11.9 % in 2007, will slow to 7 % in 2009 and forecast growth at 6.6 % in 2010.

China Daily also reported the producer price index (PPI) dipped from 6.6% in October after it peaked at 10.1 % in August, a 12-year high. The key Consumer Price Index (CPI) is 2.4 % (China’s inflation in November fell to its lowest level in 22 months). The National Bureau of Statistics noted that the decline marked the seventh consecutive month of inflation easing, much of which was attributed to falling food prices (inflation had been reported at 4% for October).

Meanwhile, China’s state-owned enterprises (SOEs) reported a 26 % decline in profits for 2008, Xinhua reported. The State Assets Supervision and Administration Commission said SOEs profits were 683 billion yuan (US$99.7 billion), down 239.4 billion yuan (US$35 million) from 2007. The greatest losses came from the petroleum and electricity industries, according to the commission.