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Fri, May 16, 2003 - Page 12 News List

China's growth is slowing


China's economic growth slowed last month as the spread of SARS deterred consumers from shopping and companies such as Siemens AG and Motorola Inc blamed the disease for flagging orders.

China's economy grew 8.9 percent last month from a year ago after expanding 9.9 percent -- the fastest pace in seven years -- in the first quarter, Xinhua news agency said, citing the National Bureau of Statistics. That marked the first time monthly economic growth figures have been released.

The bureau said the report shows the impact of the nation's SARS epidemic has been limited.

Economists said growth may slow further because it wasn't until April 20 that the government revealed the scale of the SARS epidemic. Since then, reported cases have tripled to more than 5,100.

"It's going to be a much weaker second quarter," said Rob Subbaraman, an economist at Lehman Brothers Japan Inc in Tokyo.

"It is fear of SARS that's causing the economic damage rather than the disease itself." Siemens and other companies say their sales forces are unable to move around the country because of quarantine restrictions, while consumers are staying away from stores and restaurants in Beijing and other cities to avoid contracting the disease.

China's total passenger traffic fell 6.9 percent last month as people put off traveling to avoid contracting the disease on airplanes, trains and buses. China Southern Airlines Co, the country's biggest carrier, said passenger traffic fell by about a fifth last month. Domestic airline passenger traffic plummeted four- fifths during the five-day Labor Day holiday that started May 1.

China's retail sales rose 7.7 percent last month after growing 9.2 percent in the first quarter, Xinhua said. That's the slowest pace in 44 months, according to economists, and less than the median 8 percent increase forecast in a Bloomberg News survey.

Factory production growth slowed to 15 percent last month from a record 17 percent in the first quarter, the National Bureau of Statistics said in a statement.

"Industrial production also slowed lst month, reflecting producer's concerns on SARS impact on final demand," Qu Hongbin, an economist at HSBC Holdings Plc in Hong Kong wrote in a research report. "This trend will continue in the next few months when SARS continues to disrupt consumption and exports."

Siemens, which had sales last year of 3.6 billion euros (US$4.14 billion) in China, said most of its businesses have been hurt.

Even equipment like X-ray machines critical to SARS treatment has dropped from order books as hospitals focus their immediate attention on preventing the spread of the disease.

"People would think this would be a heyday for Siemens," Ernst Behrens, president of Siemens Ltd, China, said in an interview. "That's not the case."

Motorola cited a SARS-induced slowdown in sales when it fired 250 contract workers at its cell phone factory, M.S. Gay, the factory's director of manufacturing, said last week. Motorola had US$4.7 billion of sales in China last year, more than any foreign company.

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