China's Economy Suffers "Sharp Slowdown"

[Anonymous]

At a time when several countries' economies are faltering, it was not surprising when I heard a similar story on the radio a few days ago. China's economy seems to be suffering as we began to a few years ago. However, the government is trying to prevent a worse problem from occurring and is taking reasonable measures.

[Anonymous]

China Cuts Lending Rate Amid Economic Downturn

by The Associated Press

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June 7, 2012
China cut its benchmark lending rate Thursday for the first time in nearly four years, adding to efforts to reverse a sharp economic downturn.
The interest rate on a one-year loan will be cut by a quarter percentage point to 6.31 percent effective Friday, the central bank announced. It was the first rate cut since November 2008.
Beijing has rolled out a series of measures to stimulate the economy after growth fell to a nearly three-year low of 8.1 percent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis. Private sector analysts expect this quarter's growth to fall further.
"The changes indicate mounting concern in Beijing over slowdown of growth," said Credit Agricole CIB economist Dariusz Kowalczyk in a report.
"We expect a boost to demand for lending as a result of the cuts, although the actual impact will be limited given low demand for credit."
The government has said it will pump billions of dollars into the economy through spending on building low-cost housing, airports and other public works. It also has approved a wave of major investments by state companies.
However, communist leaders are moving cautiously after their huge stimulus in response to the 2008 financial crisis fueled inflation and a wasteful building boom.
After spending two years tightening lending and investment curbs to cool an overheated economy, the government reversed course in December after exporters were hit by a plunge in global demand for Chinese goods.
On May 12, regulators cut the minimum amount of reserves Chinese banks are required to hold in another effort to boost lending. Analysts said that would have little effect because struggling businesses were unlikely to borrow.
Monthly data due to be reported this weekend are expected to show a further deceleration in industrial activity.
Thursday's rate cut was small but in line with past moves by China's central bank. Beijing tends to use small changes as a signal to banks, companies and consumers that it approves of more borrowing.
"The biggest impact of the move is likely to be on sentiment, both among businesses and consumers domestically" by showing Beijing is "bringing out the big guns to support growth," Kowalczyk said.
"They are acting early enough and investors now that they have more ammunition if need be and a good track record in using it."
Among other measures in recent weeks, Beijing has announced 66 billion yuan ($10 billion) in spending on building affordable housing and 26.5 billion yuan ($4.2 billion) to subsidize sales of energy-efficient appliances.

[Anonymous]

China sounds like it's going through what the US went through several years ago up until the present. In other words, there's no short-term fix for long-term problems. I think it's good that they finally realize their economy is in trouble, but they can't manufacture world demand for their exports overnight. And since the Chinese economy is intricately linked to that of the US, it remains to be seem what repercussions will be felt in America.

[Anonymous]

All of this definitely highlights the importance of our economics classes covering more than just our own economic systems. With so many world markets tied, we really need to have a larger picture of how each world system is operating.

[Rob_Hugo@PortNW]

I recently read a New York Times article which suggests that China's economy is hitting the brakes as a result of decreasing exports, a declining real estate market, and rising unemployment, particularly in the construction industry. By most estimates, the economy continues to grow, but at a much slower rate. Nonetheless, this slowdown has worldwide implications, since China is "the largest consumer of most raw materials and the second-largest consumer of oil." All this has had a negative effect on consumer confidence and Chinese consumers are spending much more cautiously these days. The link to this story is http://www.msnbc.msn.com/id/47561828/ns/business-us_business/t/chinas-economy-suffers-sharp-slowdown.

[Author]

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