Clouds on economic horizon: ex-official

Updated: 2012-01-07 07:53

By Chen Jia and Wei Tian (China Daily)

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BEIJING - A former top trade official has warned that the Chinese economy faces this year the most difficult situation since the global financial crisis.

Wei Jianguo, former vice-minister of commerce, said on Friday that the possibility of a recession in Europe and likely slower growth in developing economies are clouding China's economic growth.

"The nation's exports may suffer zero or even negative growth this year compared with the past year. It can further drag export-oriented companies, mostly in East China, into difficulties," said Wei, who is also the secretary-general of China Center for International Economic Exchanges.

He suggested that Chinese export companies make greater efforts to explore Latin American and Southeast Asian markets.

Wei's warning came as business activity in the fourth quarter of 2011 hit the year's low point, as indicated by the fall in the Business Climate Index to 128.2 from 133.4 in the third quarter.

The index, released by the National Bureau of Statistics (NBS) on Friday, was 135.6 in the April-to-June period and 133.8 in the first three months last year.

Meanwhile, the reading of the Entrepreneur Confidence Index, a gauge of macroeconomic prospects, fell to 122 in the last quarter of 2011, compared with 129.4 in the third quarter, indicating lower optimism among business leaders, according to the NBS.

The two NBS indices were based on quarterly surveys of 20,000 companies in different sectors. A reading above 100 signals an improvement in the business climate, and below 100 means deterioration.

The acceleration of China's economy has slowed, but a sharp downturn is unlikely in the coming months, said Pan Jiancheng, deputy head of China Economic Monitoring and Analysis Center, a research center affiliated with the NBS.

He suggested that authorities take measures to raise business leaders' confidence, especially for smaller companies, which may have more difficulties.

But not all analysts are pessimistic.

"The chance is pretty small of the global economy falling into an overall recession in 2012 because of the recovery in the United States and Japan," Lian Ping, chief economist at the Bank of Communications, said on Friday.

Lian said that China's export growth is likely to drop to 10 percent, compared with the expected 20.5 percent for 2011, because of weak external demand, but it will not see negative growth because "Made in China" products are still competitive in the global market.

"The (People's Bank of China) may lower the bank reserve rate by 2 percentage points to support business and cut the interest rate by 0.25 percentage points," he said.

China Daily