November 16, 2007, 10.30 am (Singapore time)

US slowdown could hit Chinese growth

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BEIJING – China’s exports will shrink in response to any slowing of US growth, making downside risks to global growth the biggest challenge for Chinese policy makers next year, the Commerce Ministry said in a report published on Friday.

If US demand for Chinese goods slows, China’s economy could hit a turning point in 2008, the official China Securities Journal reported, citing a report by the ministry.

‘The slowdown in US growth, the risk of credit tightening, the escalating turbulence in the emerging financial markets and the increasing uncertainty in the global economy will drag down China’s exports,’ the paper paraphrased the report as saying.

The growth of China’s exports to the United States has slowed in the first three quarters of this year, the commerce ministry noted.

In July to September, exports to the United States grew 12.4 per cent from a year earlier, down from 15.6 per cent in the second quarter and 20.4 per cent in the first three months.

The World Bank said in a report on Thursday that a slowdown in Chinese exports might not be such a bad thing, as it would help trim the country’s gaping trade surplus and moderate growth, which hit an annual 11.5 per cent in the third quarter.

The ministry also said the widening interest rate spread between the two countries would offset part of China’s efforts to curb domestic inflation and asset bubbles, thus increasing the difficulty for its policy makers in steering the economy.

Meanwhile, global capital could take China as a safe haven, creating new challenges for financial regulators, it said. — REUTERS