World will have to wait for China-led recovery: economists

SHANGHAI: An abrupt slowdown in China's economy, confirmed by government data on Thursday, has dealt a sharp blow to any hopes the Asian giant might spark a global recovery soon, analysts said.

The world's third-largest economy has taken such a beating in recent months that observers wonder if it will be able to pull off its eight-percent growth target for 2009, let alone provide momentum for the rest of the planet.

"Although the growth target is set around eight percent, there is really a question mark over whether China is able to lead the world in recovery," said Chen Yong, a Shanghai-based economist with Haitong Securities.

China's economy rapidly ran out of steam in late 2008, expanding by just 6.8 percent in the final quarter and pulling the full-year growth figure down to 9.0 percent, the National Bureau of Statistics said.

With domestic activity slowing at this pace, China will have little incentive to buy from other countries, and its imports in 2009 are likely to grow by a near-flat 0.6 percent, according to a forecast by Japan's Nomura bank.

Even so, despite slipping into single-digit growth for the first time in seven years, China is one of the only shows in town, economist say.

They point out that it accounted for more than a fifth of global growth last year, according to International Monetary Fund estimates.

"Most people accept it will take years for the US to come back and I think the China dream is the only thing that is alive today in the financial markets," said Andy Xie, an independent Shanghai-based economist.

"But it's very difficult to see anything that is growing in China -- it's all negative. What people see is China's got great growth potential," Xie said.

China's economic revival hopes are pinned partly to its four-trillion-yuan (580-billion-dollar) stimulus package, which has already started infrastructure projects to offset the construction sector's sudden collapse.

The stimulus is likely to boost commodity prices. As the construction industry uses its inventory, base metal prices are likely to see a bounce, Xie said.

China's economy could see a solid rebound starting in the second quarter as the government's stimulus plan and monetary policies boost domestic demand, JP Morgan Chase economist Frank Gong wrote in a research note.

However, he lowered his 2009 gross domestic product estimate to 7.2 percent.

"Should the global recession be more severe than expected, China's growth may come in below seven percent this year," Gong said.

Beyond the headline figures, there are deep economic problems that need to be addressed, such as why incomes are growing slower than retail sales, economists argued.

Exports could sink further -- Nomura expects a six-percent drop in 2009 -- dragging down industrial production.

Chinese consumer confidence, too, is expected to weaken further in 2009, according to a survey by investment bank Macquarie.

"The human toll is expected to be severe, as hiring has stalled and more job cuts are to come," Sherman Chan, an economist for Moody's Economy.com, said.

"A deterioration in labour market conditions will hurt household demand, making it difficult for the government to stimulate domestic demand and revive the economy's growth momentum," she said.