Royal Bank of Scotland(RBS) yesterday slashed its forecast for China's 2009 gross domestic product growth to 5 percent, from 8 percent, warning about the potential for increasing social tensions as the economy falters.
Forecasts in a Reuters poll published last week and conducted before the release of November data centred on a growth rate of 8 percent. The economy expanded by 9 percent from a year earlier in the third quarter, compared with 11.9 percent in all of 2007. "It is not a recession, but it will feel like one to the average citizen and will feel like a depression to the 100 million or so migrant workers, many of whom are out of a job and stranded far from home," economists Ben Simpfendorfer and John Richards said in a note to clients.
"Social tensions are likely to be on the rise." Beijing would be alarmed about any slowdown of that degree, as it would not enable the economy to produce enough jobs to soak up the millions of people seeking to enter the workforce each year, potentially feeding into social unrest. Policy makers are targetting an 8 percent pace, which is considered necessary to generate enough new jobs, though record low factory output expansion and negative export growth in November suggest that task may prove difficult.
"Industrial growth is slowing significantly and downside pressures are increasing," Li told a work conference, which was webcast on the ministry's website (www.miit.gov.cn). The ministry is looking into a range of measures to help industry, Li said, including further adjustments to import and export taxes, more loans especially to smaller firms, and increased government purchases of raw materials for its reserves. He added that the global financial crisis would deepen further and would affect the country's investment growth in the coming two years and beyond.
Meanwhile, the real number of unemployed in China is much more severe than statistics show after 670,000 small firms closed this year under pressure from the global financial crisis, an adviser to China's cabinet said. About 6.7 million jobs vanished, many in the export hub of Guangdong, pushing unemployment well above the official figure of 8.3 million, State Council adviser Chen Quansheng said at a forum in Beijing. Rising unemployment has fed Beijing's fears of unrest as forecasts for China's growth next year fall below 8 percent, seen as a minimum to maintain social stability.
"The real employment situation is much more grave than the official statistics, which only show the registered urban jobless number," he said. Chen urged official support for labour-intensive industries to create jobs lost to shrinking export demand and past government efforts to control growth.