A worker makes protective clothing at a factory of Lakeland Industries in Weifang, Shandong province. The Chinese government said yesterday that the manufacturing sector in the world’s second-largest economy is stable but faces downside risks.
Reuters
Warning against undue optimism about China’s export growth, the government said yesterday that the manufacturing sector in the world’s second-largest economy is stable but faces downside risks.
“The recovery in the world economy remains tortuous. We cannot be optimistic about the export situation,” Zheng Lixin, a spokesman for the Ministry of Industry and Information Technology, told reporters at a briefing.
The Chinese economy has had a tough year, with growth falling to its lowest level since the 2008/09 global financial crisis between July and September, due to a sagging housing market and cooling domestic demand and investment.
“Some firms face operational difficulties, mainly reflected in a rise in overall costs, weak market demand, and difficulties in financing and high financing costs,” the ministry’s spokesman said.
As a result, he said the government would carry out “targeted” policy action previously announced and “take more forceful measures to safeguard steady industrial growth”. He said financing costs faced by manufacturers jumped 13.5% between January and September compared with the year-earlier period, and were 5.6 percentage points higher than factories’ revenue growth.
Interest expenditure climbed 11%, 2.7 percentage points higher than firms’ revenue growth.
To support economic growth, China has cut taxes, quickened some investment projects, lent short-term loans to banks, instructed local governments to spend their budgets and reduced the amount of deposits that some banks hold as reserves to spur lending.
But the raft of measures – which were issued over a space of a few months – failed to sustain growth momentum in the economy, prompting authorities to take one of their most drastic policy actions this year by cutting mortgage rates in September. It was the first time that China had slashed mortgage rates since the global financial crisis.
Yet with some experts, including the World Bank, predicting that China’s housing downturn could last for a few more quarters, many believe that the economic outlook remained uncertain.
