Bloomberg News

China Warns Output Growth May Slow as Global Risks Increase

February 07, 2012

(Updates with Fitch comment in third paragraph.)

Feb. 7 (Bloomberg) -- China’s industrial output growth is likely to slow this quarter as the world economy cools and Europe’s debt crisis worsens, the Ministry of Industry and Information Technology said.

“The global economy is slowing down, Europe’s sovereign debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said in a statement before a briefing in Beijing today.

The Shanghai Composite Index tumbled 1.6 percent as of 2:50 p.m. local time, set for the biggest decline since Jan. 16. Fitch Ratings said today that a “hard landing” for China is a key global risk, after the International Monetary Fund cautioned yesterday that a worsening of Europe’s debt crisis could cut the nation’s growth rate almost in half from a forecast of 8.2 percent for this year.

“China’s industry development is facing an increasingly complex domestic and international environment with increased unstable and uncertain factors,” the ministry said.

Production gains may continue to be relatively rapid for the year as a whole, Zhu Hongren, a spokesman, said at the briefing.

Output grew 13.9 percent in 2011 from the previous year, according to the statistics bureau. The government is targeting an 11 percent increase this year.

The central bank has left benchmark interest rates unchanged for the past seven months, while making a single cut to lenders’ reserve requirements, as the government cools house prices and inflation.

Andrew Colquhoun, the Hong Kong-based head of Asia-Pacific ratings for Fitch Ratings, defined a hard landing as growth “significantly lower” than the rating company’s “base case” of an 8.2 percent expansion in 2012. Colquhoun commented by e- mail, confirming remarks he made earlier in a panel discussion in Hong Kong.

--Zheng Lifei. Editors: Paul Panckhurst, Scott Lanman

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net

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To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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