China's economy slowing at the worst time

The long speculated post olympic slowdown in the Chinese economy is already underway and threatens to take hold. Exports are barely growing this year and a survey of manufacturing purchasing managers showed an unusual month-over-month decline in new orders in July.

Demand is also beginning to weaken for big-ticket purchases. J. D. Power and Associates just cut its forecast for car sales in China this year to 5.95 million the previous forecast of 6.2 million. In a sign for bigger troubles for the broader economy the real estate market is also weakening with residential real estate prices dropping by 10 percent in certain desirable neighbourhoods olver the last year.

The Chinese government has already taken decisive actions after having put the brakes on the economy in the last five years to prevent inflation from overheating. But will this prevent the slowdown from taking hold is the big question for China and its trading partners around the world. In a good sign economists expect growth to slip only slightly from its recent pace of 11 percent annually to as low as 9 or 9.5 percent over the coming year.

from the NYT:
For example, after letting China’s currency rise sharply against the dollar in the first half of this year, China’s central bank has actually pushed it down against the dollar in each of the last four trading days, including a decline of 0.13 percent on Monday. This is helping to preserve the competitiveness of Chinese exporters in foreign markets, although at the risk of angering the United States and other trading partners.

In the last several days, Chinese authorities have also raised export tax refunds for garment manufacturers — an industry previously slighted by regulators, who remain more interested in promoting higher-tech industries.

Policy makers have also reportedly moved to ease lending limits on banks.


source: Booming China Suddenly Worries That a Slowdown Is Taking Hold
NYT http://www.nytimes.com/2008/08/05/business/worldbusiness/05yuan.html?_r=1&ref=business&pagewanted=print