Thursday, 11 December 2008

China Will Save Us........Not, Part II

Last month I noted that China will not save the Australian economy. Actually I've been talking about it for more than a year. We got some more evidence that the Chinese economy is slowing sharply yesterday. From Bloomberg:

China Makes `Stable' Economic Growth Top Priority

Exports fell for the first time in seven years last month, China said today, adding to evidence that recessions in the U.S., Europe and Japan are driving the world's fourth-largest economy into a slump. China announced a $583 billion stimulus package in November and cut interest rates after the economy grew at the slowest pace in five years in the third quarter.

``The difficulties in the Chinese economy are growing and the downward pressure on economic growth is increasing,'' the report said. ``Businesses are facing greater difficulties, and it's become harder to maintain stable agricultural development and continue to increase farmers' incomes.....''

....Exports declined 2.2 percent in November from a year earlier, the customs bureau said in a statement on its Web site today. Imports plunged 18 percent, pushing the trade surplus to a record $40.1 billion.

Just for some context, forecasters were expecting exports to rise 15% and imports were expected to be up 12%. Many have talked about the Chinese economy slowing from a double digit rate to something like 6-7%. I doubt anyone has factored in 3-4%. Especially the overly optimistic forecasters in the Australian government and the Reserve bank.