China’s economy may have expanded at the slowest pace in seven years in the fourth quarter as exports collapsed, adding to pressure for more stimulus measures and undermining growth across Asia.
GDP grew 6.8 percent from a year earlier, according to the median estimate of 12 economists surveyed by Bloomberg News, down from 9 percent in the previous three months. The data is due to be released this week.
Chinese Premier Wen Jiabao (溫家寶) has pledged more measures after unveiling a 4 trillion yuan (US$585 billion) package in November and the central bank may add to five interest rate cuts since September.
Plummeting Chinese demand for parts and materials for exports is reverberating across Asia, driving Taiwan and South Korea closer to recessions and worsening Japan’s economic slump.
“China’s era of hyper-growth is coming to a sudden, very disruptive end,” said Kevin Lai, an economist with the Daiwa Institute of Research in Hong Kong. “China’s imports are slumping dramatically and the rest of Asia relies on it very significantly.”
Lai expects the key one-year lending rate to decline to 4.5 percent from 5.31 percent by the middle of the year. He also sees reduced reserve requirements for banks.
After vaulting past Germany to become the world’s third-biggest economy in 2007, China may this year face its first drop in shipments since at least 1990.
The slowdown from the previous three months would be the sharpest since quarterly data began in 1994. The pace compares with 13 percent growth in 2007. Morgan Stanley on Saturday cut its forecast for this year’s expansion to 5.5 percent.
Consumer-price inflation may have cooled to 1.6 percent last month from a 12-year high of 8.7 percent in February, a second survey showed. Producer prices fell 0.1 percent, the first drop since 2002, economists estimated.
Besides the export slowdown, slumps in stocks and property are undermining consumer confidence and growth.
“Exports are not going to recover any time soon and the property market is struggling,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. “More easing is needed because demand won’t return in a hurry.”
Exports may drop 6 percent this year, down from a 17.2 percent gain last year, Fitch Ratings said on Friday.
The central bank has helped exporters by halting the yuan’s gains against the dollar over the past six months.
Among the biggest losers from China’s waning demand are Taiwan, which shipped almost 36 percent of its exports to China in 2007; South Korea, which sent 25 percent; and Japan, which shipped 19 percent, UBS AG said.