Special Report:Global Financial Crisis
by Chinese media writers Lin Jianyang, Chen Yinan and Wang
Pan
GUANGZHOU, Feb. 2 (Chinese media) -- To people in China's
southern export bases like Guangdong and Zhejiang provinces, the celebration of
the Year of the Ox was tempered with bitterness as exports plunged and the
economy, like many others in Asia, cooled to its slowest pace in years.
Many hoped that the Lunar New Year, which arrived a
couple of weeks earlier than usual on Jan. 26, would bring an early economic
recovery.
Analysts believe this is possible, because amid the
gloom of falling exports in the south, China can benefit from resilient consumer
spending, strong investment growth spurred by a massive stimulus package and an
active government role in economic development.
PLUNGING EXPORTS, SLOWING GROWTH
In Guangdong, which has the largest economy among
China's provinces, tens of thousands of export-oriented factories make
everything from toys to clothes, telecom devices and cars. Many of these
companies have never experienced such a tough year as 2008, when overseas demand
virtually evaporated as the financial crisis hit real economies around the
world.
Yao Zhongwo's Sunrise Houseware, which produces
non-stick cookware, was one of the small companies whose export orders virtually
dried up. In the second half of 2008, plummeting demand from the United States
and Europe, Yao's major markets, forced him to suspend work on a new factory and
lay off workers.
"I have been doing business over the last 12 years.
But I have never seen any leaner year than 2008 with so many difficulties," he
told Chinese media.
The impact of the global financial crisis is clear
and widespread. Many Guangdong exporters couldn't meet their 2008 goals. In
November and December, the province's exports fell 5.1 percent and 6.8 percent
respectively year-on-year. The last monthly drop for Guangdong's exports was in
March 2002.
Last year, Guangdong's exports reached 404 billion
U.S. dollars, up 9.4 percent from a year earlier. The growth rate, however, was
12.8 percentage points less than in 2007. It was also below the 10percent target
the province set in early 2008.
Liang Yaowen, director-general of the Guangdong
Foreign Trade and Economic Cooperation Department, acknowledged that the
financial crisis was having a severe impact on Guangdong. Exports account for
about 75 percent of Guangdong's economy, vs. a national level of 32.6 percent.
"Last year, Guangdong received 30 percent to 40
percent fewer export orders than the previous year," he said. That decline
indicates an even worse year for Guangdong's exports in 2009, given the timing
difference between orders and deliveries, and provincial officials like Liang
said Guangdong's exports faced an "unprecedented grim" situation this year.
Liang forecast Guangdong's exports might grow as
little as 0.1 percent in 2009.
Since Guangdong's exports accounted for more than one
fourth of the country's total of 1.43 trillion U.S. dollars last year, the
provincial decline had a significant impact on national figures.
In November, China's exports fell 2.4 percent
year-on-year, the first monthly decline since June 2001. In December, the
decline was 2.8 percent.
The declines took some of the sizzle out of economic
growth since exports, along with investment and consumption, was one of the
three major factors driving the economy.
China doesn't provide an exact breakdown of those
three components of gross domestic product (GDP), but domestic and foreign
economists have estimated that foreign trade normally accounts for about 40
percent and investment for about 35 percent.
FIGURES GET UGLY
In the fourth quarter of 2008, economic growth slid
to 6.8 percent year-on-year, sharply down from 9 percent in the previous
quarter, the National Bureau of Statistics (NBS) has reported.
That was the slowest pace since the fourth quarter of
1999, when the economy grew only 6.1 percent as a result of the Asian financial
crisis.
On a full-year basis, GDP grew 9 percent
year-on-year, the lowest since 2001, when an annual rate of 8.3 percent was
recorded.
Breaking down growth by activity, Ma said, the 9
percent included 4.2 percentage points from investment, 4 points from
consumption and 0.8 points from exports. In 2007, exports contributed more than
3 percentage points of the annual 13 percent GDP growth.
Tang Min, deputy secretary of the China Development
Research Foundation, a think tank linked to the State Council (cabinet), said
the financial crisis had struck hard at exports and export-related industries,
which led to some ugly figures.
"As a major economy, China relies too much on
exports, which entails big risks," said Tang.
Ding Yuanzhu, a Beijing-based economic scholar with
the National School of Administration, a training facility for civil servants,
echoed Tang's assessment. Even though China has become the world's third-largest
economy, it has weaknesses, such as a heavy reliance on trade and weak domestic
demand. The global economic crisis underscored those weaknesses, he said.
In mid-January, the NBS revised China's 2007 GDP to
25.73 trillion yuan (3.76 trillion U.S. dollars), which enabled China to
overtake Germany as the world's third-largest economy, after the United States
and Japan.
INCOMES, RETAIL SALES ARE SILVER
LINING
Ding and Tang described the Chinese economic picture
as grim, but they also saw signs of optimism, because other major economic
indicators such as retail sales, urban incomes and investment continued to grow
strongly.
"It is good to have robust consumption, with retail
sales growing markedly. Moreover, net income of urban residents didn't fall,"
said Tang.
According to the NBS, retail sales jumped 21.6
percent last year to 10.8 trillion yuan, which was 4.8 percentage points higher
than a year earlier. Urban disposable incomes averaged 15,781 yuan in 2008, up
14.5 percent year-on-year.
The NBS' Ma said real retail sales growth was 17.4
percent in December, or 0.8 percentage points more than in November.
He cited the December sales data as an indication of
positive economic change. Other factors included acceleration in industrial
output and a strong rebound in the money supply.
"Domestic sales growth remained relatively fast and
consumption in urban and rural areas remained robust," he said, adding that
strong consumption growth was expected to continue this year and help offset the
impact of any export slowdown.
Another area of growth would be fixed-asset
investment, which rose 25.5 percent to 17.23 trillion yuan in 2008. The growth
rate was 0.7 percentage points higher than the previous year.
Yuan Gangming, a senior economist at the
Underdeveloped Economic Center of the Chinese Academy of Social Sciences (CASS),
a major government think tank, saw the 6.8-percent rate as a strong sign that
the economy had touched bottom.
"Since many factories reduced production during the
Lunar New Year holidays, economic growth in the first and second quarter this
year is likely to bounce around the bottom, but we probably won't see uglier
figures hereafter," he told Chinese media.
"Now that the monetary and fiscal policies have been
turned to positive and a series of measures have been announced, an economic
rebound is very likely," he said.
QUICK TURNAROUND
In September, the government made a macroeconomic
U-turn as it shifted from fighting overheating to actively stimulating the
economy. The central government announced a series of measures to spur
investment and expand domestic demand. These included a 4-trillion-yuan stimulus
package, a plan to expand rural ownership of home appliances and the issue of 3G
telecoms licenses.
Additionally, the People's Bank of China (central
bank) has cut interest rates five times since Sept. 15.
Unlike some emerging market economies, China is in a
relatively strong position in terms of foreign debts. As of Sept. 30,
outstanding foreign debt was about 442 billion U.S. dollars, up about 18 percent
from the end of 2007. Short-term debt accounted for about two-thirds of the
total. At end-September, foreign reserves totaled about 1.9 trillion U.S.
dollars.
China's central government finances also provide it
with some degree of flexibility: last year's budget deficit was about 111
billion yuan, but that was less than 1 percent of GDP.
REGIONAL IMPACT VARIES WIDELY
Another significant factor, Yuan said, was that many
inland and northern regions were less affected by the financial crisis and its
impact on exports.
In comparison with more export-oriented provinces
such as Guangdong and Zhejiang, where many factories cut back or shut down,
inland and northern Chinese regions had been less affected. "Regions or
companies with more connection with domestic demand suffered less impact," he
said.
NBS' Ma said he was confident of the economy's
prospects partly because robust demand in less-developed central and western
regions would continue to propel national growth.
These less-affected regions were seeing more
development opportunities in the past two months as the central government acted
to stimulate the economy.
Party chief Zhao Shihong of Langfang in north China's
Hebei Province did not think the financial crisis had exerted a significant
impact on the city, which is located between Beijing and Tianjin. Instead, he
said he expected the response to the crisis would mean opportunities for the
city.
Langfang won big projects valued at more than 10
billion yuan from the country's stimulus plan, including construction of two
light rail lines. "It would have been very difficult to win investment in
the past," he told Chinese media.
Zhao forecast the city's economy would grow up to 12
percent this year despite the financial crisis.
Posts
No comments:
Post a Comment