China Growth Slowest In Five Years

Still a torrid 9% GDP, but enough to kick the government into easing mode.

NYT: Economic growth in China slowed to 9 per cent in the third quarter of this year, the slowest pace in more than five years, as industrial production and construction slackened because of weak exports, a slumping real estate market and temporary restrictions imposed during the Beijing Olympics.

Some economists had suggested in August that the forced closing of many factories during the Olympics — to provide cleaner air for the athletes — had been the main factor behind the beginnings of weaker economic activity. But extensive statistics released on Monday by China’s National Bureau of Statistics pointed to a much broader pattern of weaker growth that could be readily explained by the Games.

Many factories, power plants and other operations reopened in the Beijing area last month. Yet industrial production expanded less briskly in September, rising 11.4 per cent from a year earlier, than in August, when it grew 12.8 per cent.

But China has more options than most countries to cope with slower growth. For starters, inflation is slowing at the consumer level — the government said on Monday that it was 4.6 per cent in September, down from 4.9 per cent in August and the fifth monthly decline.

With less to fear from rising prices, China’s central bank has already begun reducing regulated interest rates and loosening restrictions on bank lending. With the government running a large budget surplus, the finance ministry has begun lowering taxes on stock and real estate transactions and on exports of textiles and electric machinery.

Other ministries are starting to expand their spending on transportation links and on the rebuilding of earthquake-damaged areas of Sichuan province.

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