Absolutely no one is immune from the effects of the global economic slowdown, not even China. The only major economy to be growing at double-digit figures over the last three decades, the country is now facing an unprecedented crisis as the powerful growth engine continued to lose steam in the third quarter and the growth rate fell to its lowest level in more than five years.
The nation's statistics bureau says that gross domestic product grew by 9.0 per cent in the third quarter from July to September, its slowest rate since 2003, the year of the SARS epidemic.
Even the previous quarter had yielded 10.1 per cent. The consensus forecast among analysts had been for 9.7 per cent GDP growth. Annual growth in the first nine months was 9.9 per cent, well down from 11.9 per cent in all of 2007, the National Bureau of Statistics (NBS) said on Monday.
On Monday, a number of economists revised their GDP forecasts for 2009 downward to an unusually low level for China. JP Morgan dropped its estimate from 9.5 per cent to 8.7 per cent, and Merrill Lynch from 9.3 per cent to 8.6 per cent. Morgan Stanley kept its growth estimate at 8.2 per cent.
China's economy, the world's fourth largest, had expanded by double digits over the prior 10 consecutive quarters, including 11.5 per cent in the third quarter of 2007. But weakening demand for China's factory goods from the US and sagging property prices at home have taken a toll on exports and investments - two big drivers of China's economy.
Analysts said the Beijing Olympics in August, which sought to raise China's status worldwide, might have also had an impact, as many factories were ordered to shut down or reduce output shortly before and during the games.
National Statistics Bureau spokesman Li Xiaochao said in announcing the new GDP numbers Monday that the figures had some bright spots. Inflation slowed to 4.6 per cent, a 15-month low, versus 8.7 per cent in February. Retail sales were up, as was fixed investment. On the other hand, Li added, the situation did not seem to have reached its low point yet. "There are no signs of a definite recovery from the financial crisis," he said.
As the sub-prime mortgage crisis that began in the US 14 months ago spread around the globe, China's economy seemed poised to be the only major economy that was not seriously affected. Recently, however, there have been signs that it, too, is being hit by the crisis. Tens of thousands of factories have closed and its stock market has lost billions of dollars.
The confidence among Beijing's policy makers that China had escaped the worst of the global financial crisis is evaporating. Their response is a stimulus package to stop the economy slowing further - and to forestall potentially politically troublesome rising unemployment.
The package will likely include a third cut in interest rates in as many months, more public spending on infrastructure, particularly railways (which are in woefully in need of it for moving both freight and passengers), new tax breaks to prop up a slumping housing market, measures to boost rural incomes, and more tax rebates for hard pressed exporters.
This slowdown is bad news for those who had projected China as a saviour of the western world duriing its ongoing economic slowdown and financial system crisis. They believed that China's foreign exchange reserves adding up to nearly two trillion dollars would provide the much-needed cash infusion needed to jumpstart Western economies.
However, with the announcement of the latest dismal figures, they are not so sure anymore. Previous enthusiasm at such a scenario has come to be replaced with genuine fear that the slowing of Chinese demand will undermine hopes that the country can take over as the growth engine for a global economy battered by the financial crisis.