China warns of weak int'l demand amid global slowdown

Updated: 2007-11-17 14:12

In its latest economic outlook, China's Ministry of Commerce warned of a possible slide in international demand with an anticipated global slowdown.

Sheng Baofu, a senior researcher with the ministry and author of the report, said the next stage of China's economic growth would be tied to international demand. Sheng said the government should develop flexible macroeconomic policies to respond to the uncertainty of global trends.

The report said the world economy would slow due to the dimming outlook for the US economy, which would cause a sharp decline in China's exports.

In mid-2007, the United Nations forecast that the growth of world gross product would slow to 3.4 percent for 2007 as a whole, from 4.0 percent in 2006.

If the US economy weakened, US demand would fall. Regions with close links to the US, such as the European Union and East Asia, would immediately feel an impact, the researcher said.

The US remained China's second largest export destination, ministry statistics show. China's exports to the US in the first quarter of 2007 rose 20.4 percent year-on-year. However, export growth slowed to 15.6 percent in the second quarter and even further, to 12.4 percent, in the third quarter, according to the ministry's statistics.

In the first three quarters of the year, exports to the US accounted for 19.4 percent of China's total, closely behind those to the European Union. According to China's central bank, when US economic growth slows by one percentage point, China's exports decline by six percentage points.

Further, US and Chinese interest rates are moving in opposite directions, which could cause disruptions in China's financial markets and offset the Chinese government's efforts to rein in inflation, the report said

Consumption growth remained sluggish in the first ten months of the year and failed to drive economic growth, said the report.

Ha Jiming, chief economist with China International Capital Corporation Limited, said that real domestic consumption has been flat for the past two and a half years.

China's trade surplus hit a new monthly record of 27 billion US dollars in October, putting the nation under intense pressure to allow its currency to strengthen to ease tension with its major trading partners.

The report said the government should maintain a stable foreign trade policy and prevent a sharp decline in exports.

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