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China's GDP growth is slowing

The 6.1% increase in the first quarter probably still topped the growth rates of other major economies.

April 16, 2009|Don Lee

SHANGHAI — China reported today that its economy grew at the slowest pace on record in the first quarter. But signs are emerging that the worst may be over for the world's third-largest economy.

The 6.1% increase from a year earlier in the country's gross domestic product -- the value of goods and services produced -- probably still topped the growth rates of other major economies. But the latest figure was the lowest since at least 1992 -- and down from increases of 6.8% in the fourth quarter and 10.6% in the first quarter of last year.

Analysts had expected growth to slow in the latest period because of a continued erosion in China's exports to recession-battered economies in the U.S. and Europe, where consumers and companies have sharply cut back on spending. China's exports fell 17.1% in March from a year earlier, but that was an improvement from the 25.7% decline in February.

There have been other encouraging reports of late for China's economy, which bodes well for the rest of the world, particularly countries that are large suppliers of metals and other commodities. And faint signs that the U.S. economy may be stabilizing could soon lift Chinese exporters.

"I would say we are at the bottom of a U-curve with signs of an upswing emerging," said Zhu Baoliang, chief economist at the State Information Center, a government think tank. He attributed the improving picture largely to the central government's $585-billion government stimulus measure, which includes spending on infrastructure and social programs. In addition, Chinese banks, which are mostly state-owned, have reported lending huge sums in the first quarter.

China's industrial production jumped 8.3% in March, compared with a 3.8% rate in January and February. In contrast with the U.S., auto sales in China have remained strong and have even overtaken the volume of vehicles bought by Americans.

China's real estate market and foreign investments also appear to be improving. The Shanghai stock market is up almost 40% year to date.

But Zhu cautioned that China's economy wasn't out of the woods yet. "Although our domestic investment and consumption are recovering fast, the impact from overseas demand on exports is still huge," he said.

Others monitoring the manufacturing and hiring scene in that region say they see stirrings of life again.

Just a couple of months ago, Zhang Quanshou, president of a labor-supply firm in Shenzhen, was struggling to find enough jobs for his workers. Now it's the other way around, he said. "Right now, the supply is unable to meet demand," he said, noting that partly reflects how many migrant workers went back home because they couldn't find work and haven't returned to Shenzhen.

In Washington, the Obama administration on Wednesday declined to formally label China a currency manipulator.

The finding in a semiannual Treasury Department report came after Treasury Secretary Timothy F. Geithner said President Obama believed China was manipulating the value of the yuan.

Critics contend that Beijing keeps the currency's value artificially low to gain an unfair trade advantage.


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