The slowdown threatens China

The poor indicators published by China suggest that the second world economy is slowing more severe than expected and its leaders have only limited options to find a path of strong growth, said analysts. Some even think that the Middle Kingdom may be currently experiencing the beginning of one of the worst slowdown in the last twenty years.

“This is quite worrying, and it’s worse than before. It appears increasingly that we are witnessing a very generalized slowdown,” said Zhou Hao (周浩), an expert of the ANZ Bank in Shanghai.

This is also why the Chinese central bank announced Saturday a new lower bank reserve requirements to enable them to lend more.
The central bank had already lowered the reserve requirement in December and February. And most experts expect further monetary easing to support economic activity.

“We will certainly witness further declines of bank reserve ratio in the coming months, and there may be a rise in government spending,” said Zhou.

Industrial production in the workshop of the world has been increasing by only 9.3% in April, the lowest figure since May 2009. Foreign direct investment (FDI) in China fell for the sixth consecutive month in April, announced Tuesday the Department of Commerce. Investments from European Union have declined 27.9% year on year to $ 1.9 billion between January and April.

“The external environment has an increasingly negative impact on China, Japan and South Korea,” admitted Premier Wen Jiabao during the weekend when he met the leaders of the two Asian powers.

The Chinese government has lowered the growth target of gross domestic product (GDP) this year to 7.5%, against 8% in previous years, while the economy remains very strong investment-led.