China’s GDP grew 6.8% from a year earlier in the fourth quarter of 2008. Still an enviable figure by current world standards but it marked the slowest pace of growth for the Chinese economy since 2002, as well as a significant drop from 9% growth in the previous quarter.
For the year 2008, China’s economy expanded 9% to 30.067 trillion yuan (US$4.4 trillion) – the first year of single-digit growth since 2003 and well below the average rate of 9.8% in the past 30 years, according to Ma Jiantang, Commissioner of the National Bureau of Statistics (NBS).
The latest GDP reading consolidated China’s position as the world’s third-largest economy after the United States and Japan. The NBS last week revised the country’s growth in 2007 to 13% from the original estimate of 11.9%, putting its GDP at $3.38 trillion against Germany’s $3.32 trillion.
Germany’s GDP increased a percent last year, according to earlier reports, citing Germany’s federal statistics office. Europe’s largest economy could have shrunk as much as 2% in the final quarter of 2008, the office estimated.
Even so, the Chinese government is feeling the heat from the current economic slump. Conventional wisdom has it that China has to keep its expansion rate above 8% to have its workforce employed.
As a result, China may have to create 14 million new jobs in 2009, estimated Long Guoqiang of the State Council Research Center, citing the fact that around 6 million college graduates will enter the workforce this summer and millions of rural youth come of working age.
That represents a huge challenge for the government, who fears that the worst has yet to come for the country’s economy. This year will be the toughest year since 2000, Premier Wen Jiabao said Monday at a State Council meeting.
What is good news for the economy is that inflation continued to ease in December, giving the central bank more room to cut interest rates, the tool of choice in times of economic downturn.
The Consumer Price Index (CPI), a barometer of inflation, rose 1.2% year-on-year in December, after increasing 2.4% in November, said Ma of the NBS. That was a far cry from a peak rate of 8.7% in February 2008 after eight months of steady decline, thanks to falling prices of food and commodities.
However, the bad news is that inflation is falling too fast, giving rise to increasing worries of deflation, a sustained decrease in the general price level.
The Producer Price Index (PPI), another indicator of inflation, fell 0.4% in December from a year earlier, according to Ma, the first month of negative growth in six years. The gauge, which measures factory gate prices, went into a freefall after peaking in August at 10.1% and showed no signs of slowing down. It rose 6.6% in October and 2% in November.
Source – ChinaDaily
