Home' Trinidad and Tobago Guardian : August 26th 2015 Contents A23
Wednesday, August 26, 2015 www.guardian.co.tt Guardian
BEIJING---China s slump is shak-
ing the world economy, turning
a country long seen as a growth
engine into a possible threat.
The slowdown started as a side
effect of the Communist Party s
plan to steer the world s second-
largest economy to a "new normal"
of lower, steadier growth. It has
turned into a nose dive the party
is struggling to reverse.
The party s plans call for keeping
economic growth close to 7 per
cent this year while China shifts
from reliance on trade and invest-
ment to more self-sustaining
growth based on domestic con-
Exports were supposed to grow
by 6 per cent this year, but instead
they are shrinking.
Factories are shedding millions
of jobs, threatening to inflame
political tensions. New industries
including e-commerce are growing
but still are too small to offset job
losses in traditional businesses.
"There are pockets of extreme
weakness in China s economy but
also areas of strength," said Mark
Williams, chief Asia economist for
Capital Economics in London.
"The services sector seems to
be doing well, but industry is really
The new normal
The Communist Party succeed-
ed at cooling a debt-fueled con-
struction and real estate boom.
But creating a consumer economy
is taking longer as households fac-
ing an uncertain job market tighten
their belts. Steel, coal mining and
heavy industry are cutting work-
forces while retail spending and
new industries are growing but
still are small.
The government reported eco-
nomic growth held steady at 7 per
cent in the latest quarter, though
private sector analysts say the real
figure might be 5 per cent or lower.
Whatever it is, growth is due to
fall further. Communist leaders
say they can tolerate lower headline
growth so long as the economy
generates enough jobs.
Manufacturing and exports
Sales by China s powerhouse
exporters, who employ tens of
millions of people, shrank by an
unexpectedly sharp 8.3 per cent
China juggles growth, reform plans
in July from a year earlier.
It looks increasingly unlikely China
can meet its 2015 growth target of 6
per cent. The ruling party wants to
avoid dumping laid-off factory workers
into the job market.
The number of factory jobs in the
southern province of Guangdong, heart-
land of China s export industry, fell by
nearly 5 million from a year earlier to
13.3 million in first quarter of 2015.
The China Labour Bulletin, a research
group in Hong Kong, says there have
been 211 strikes this year in Guangdong,
mostly over back wages owed to laid-
The threat of job losses has forced
Beijing to inject money into the econ-
omy through railway construction and
other measures, setting back efforts to
reduce reliance on investment.
Beijing has cut interest rates five
times since November. That reduces
financing costs for state companies but
does little for entrepreneurs who gen-
erate wealth and jobs but have little
access to the state-owned banking
industry. Private sector analysts say the
quickest way to revive the state-dom-
inated economy is to move faster on
promised reforms to give entrepreneurs
a bigger role. Beijing s surprise August
11 devaluation of its yuan was criticised
by some as an attempt to help strug-
gling Chinese exporters, but economists
said the 3 per cent change was too small
to make a difference due to weak global
demand. Still, it prompted fears of a
"currency war" if other governments
responded by devaluing their own cur-
rencies to keep export prices low.
China s state-owned banking indus-
try is a powerful tool that allows Beijing
to channel money to politically-favoured
projects or to force cash into the econ-
omy to boost growth. Lending rose in
July, but analysts say much of the
increase went to other financial insti-
tutions. That included loans to a state-
owned company that was charged with
propping up the sinking stock market
by purchasing shares. At the same time,
lending to businesses weakened. Com-
munist leaders say they want to make
state-owned banks more market-ori-
ented and competitive.
But entrepreneurs still get few loans
and borrow instead from an unregulated
underground credit market at high
Chinese men chat on the street near a billboard promoting deposit rates for
the US dollar in Beijing. AP PHOTO
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