World Bank: Sluggish Exports To Derail China's Growth

Senior economist says China's manufacturing industry heavily reliant on foreign orders that are evaporating, so growth prospects for 2009 will 'have to be revised downwards'.

BEIJING (AP) -- China's economic growth will slow in coming months as crucial export markets in Europe and the U.S. dry up, the World Bank's senior economist in Beijing said Thursday.

In an interview with AP Television, Louis Kuijs said China's overall economy remained sturdy amid the global financial meltdown because Chinese companies are less reliant on stock markets for funding.

Chinese banks are flush with cash, maintain strict capital controls, and purchased relatively little of the toxic debt that is dragging down foreign institutions, Kuijs said.

However, China's manufacturing industry remains heavily reliant on foreign orders that are now evaporating, so growth prospects for 2009 will "have to be revised downwards," Kuijs said.

"What is happening at the moment is becoming a little more challenging and it looks like at the moment, the real economy in the U.S. and in Europe is starting to be affected quite a bit by those financial market events," Kuijs said.

That would "have its impact on China as well," he said.

The World Bank is maintaining its forecast of 9.8 percent growth for China this year, although Kuijs said most of that expansion had been accumulated prior to last month's Wall Street panic.

The World Bank had previously said it expected China's economy to grow by 9.2 percent in 2009. Kuijs did not give a revised figure for next year.

China's exports of toys, shoes and household goods have stoked its recent growth and a slowdown threatens to throw millions of low-skilled Chinese out of work. That would have knock-on effects on economies elsewhere because raw materials and equipment used for exports, ranging from Australian iron ore to German machinery, made up half of China's nearly $1 trillion in imports last year.

Other dangers to the economy are domestic, including a bursting housing bubble and a slow-motion stock market crash that has sent key indexes down 70 percent from their Oct. 2007 apex.

Although beginning to slow, exports held steady in September, with China's trade surplus ringing in at a new monthly high of $29.3 billion. Exports make up just 5 percent of China's economic output, but account for about 20 percent of growth.

October could be a different story, however, with a vice minister of commerce warning Wednesday of tough times ahead.

"The financial turbulence may have a relatively big impact on China's exports," said Gao Huicheng, the minister. "We need to be on high alert."

Gao spoke at the opening of the Canton Fair in southern China, which attracts thousands of overseas buyers to place orders for goods from stereo speakers to shingles.

Business at the two-week expo, the country's largest, is being watched closely as a barometer of how dire export markets have become.

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