SHANGHAI-Signs that the powerhouse Chinese economy is slowing have spooked global markets and sharpened fears that the world economy will not escape another recession, so much so that a small, preliminary survey of Chinese manufacturers contributed to a global stock market plunge this week. However, analysts said Friday that the dramatic fallout from a preliminary reading of HSBC's index of manufacturing for September far exceeded the data's importance. And while the world's number two economy is slowing as expected, they said, growth will remain relatively strong.
If nothing else, the market rout that began Thursday and continued yesterday reflects how much the rest of the world is relying on China, one of the few big economies that is expanding at a rapid clip, to stave off recession. HSBC's preliminary survey, released about a week before the final survey is due, showed a two-month low of 49.4. That followed an August reading of 49.9, and anything under 50 indicates that activity is contracting. Coming alongside weak indicators from other major economies, the data prompted panicked selling by global investors afraid that governments hamstrung by debt crises, inflation and unemployment may be unable to avert a recession.
Powering world growth
But the HSBC survey is only a monthly snapshot, ill-suited to indicate long-term trends, said Xianfang Ren, chief China economist for IHS Global Insight. It also is heavily weighted toward exporters, which are bound to be feeling cautious given the current global outlook, and is not a reliable measure of the broader economy, said CLSA analyst Andy Rothman. An official manufacturing index that surveys a bigger number of companies is due around the end of September. Most forecasters expect economic growth of above 9 per cent this year and between 8.5 per cent and 9 per cent next year.
Still, what's clear is that China's role in powering world growth is significant. That's especially so for nations such as Australia that are heavily dependent on China's voracious demand for the minerals they export, and for export-reliant countries in Asia including Singapore, Taiwan and Japan. The Conference Board forecasts China will account for about a third of the increase in global GDP this year. Yet despite China's rising power, experts say its economy is still not big or strong enough to fully compensate for meltdowns elsewhere, since its own investment and spending is only one-sixth that of the European Union and United States.
