Industry has slowed in China and their economy could be shrinking, according to recent figures released. Industrial production, a key economic indicator for the country, was at 5.4 percent in the year to November, down from mid-year figures of 17 percent.
“Everything is pretty bad and we’re not at the worst point yet,” remarks Paul Cavey, China economist for Macquarie Bank. The most ominous indicator has been a distinct slowdown in the real estate sector, which has been a key factor in the economy, he says. “Real estate construction is currently contracting by 20 percent year-on-year and by early next year it will be 30 percent.”
Economists expect the giant to fall in the first half of 2009 and pick up again in the second half when government stimulus starts to have an effect.
Chinese regulators have indicated they will deal with the risk proactively. “China’s economic and financial situation merits no optimism and Chinese banks will face stern challenges in 2009,” says Liu Mingkang, China’s top banking regulator. “The possibility of moving to deflation from inflation has greatly increased.”
