Risks of Economy Downturn Rising in China

By JOE McDONALD / AP WRITER

BEIJING — The risks of an economic downturn in China are growing and protectionist sentiment abroad could hurt global growth, the country's central bank said Tuesday.

"The impact of the international financial crisis is intensifying, and the uncertainty of the domestic economy is increasing. The risk of an economic slowdown is expanding," the People's Bank of China said in a quarterly report.

China's economic growth slowed in the latest quarter to 9 percent, down from last year's 11.9 percent. That prompted Beijing to launch a multibillion-dollar stimulus package November 9 that aims to boost growth through heavy new spending on construction, tax cuts and aid to the poor and farmers.

The central bank said it would make sure adequate credit is available to support the stimulus.

Growth in exports and industrial outputs has slipped as global demand for Chinese exports weakens. That has alarmed the country's communist leaders because of the rising threat of layoffs and possible unrest.

The central bank warned of protectionist sentiment in reaction to the slowdown and said it might hurt global growth.

"With the slowdown of the world economy and rising unemployment, anti-globalization, represented by trade protectionism, is likely to exist for a long time," the bank said. "It will cause a negative impact on the sustainable, healthy development of the world economy."

In new signs of a slowdown, reports Tuesday said demand for electricity, a key indicator of industrial activity, and consumer demand for fuel have weakened.

Power consumption in October fell 0.46 percent from a year earlier, the first drop in several years, the official newspaper Economic Information Daily said, citing State Grid Corp, which runs most of China's power-distribution network.

The government said last week that industrial production in October grew at its slowest rate since 2001, expanding by 8.2 percent, compared with September's 11.4 percent rate.

Fuel demand has weakened sharply since September due to the global financial crisis, the president of state-owned China National Petroleum Corp, China's biggest oil company, said on its Web site.

"Especially since September, the impact is more obvious and prominent. Basically, it is reflected in such things as a sharp shrinking of consumer demand," Jiang Jiemin said in a November 14 speech, according to a transcript on the CNPC Web site.

Sales of gasoline and diesel at State-owned CNPC, the parent of publicly traded PetroChina Ltd, and its rival China Petroleum & Chemical Corp, also known as Sinopec, have grown at annual rates of more than 10 percent in recent years.