Country Report China February 2009

Summary

The government's main priority is to support the economy, amid concerns that rising unemployment could increase social unrest. However, should unrest rise, it is unlikely to lead to a nationwide anti-government movement.
Accountability will improve within the ruling Chinese Communist Party, but wider reforms to increase democracy will not occur. The government's campaign against official corruption will continue.
The Economist Intelligence Unit expects real GDP growth to slow sharply in response to the massive global economic downturn. In 2009 real GDP will grow by just 6%. Growth will recover in 2010, but only to 7.3%.
The economy will be supported by a rapid expansion in government infrastructure spending and policies to revive housing investment. However, this will lead to a rise in the budget deficit.
Amid slowing demand and falling commodity and food prices, consumer prices are expected to decline by an average of 0.2% in 2009.
Despite the poor outlook for exports, falling commodity prices will depress import values. As a result, the trade surplus will remain huge. The current-account surplus will narrow to 7.1% of GDP in 2009 and 5.6% in 2010.

The Chinese government has cracked down harshly on a group of dissidents who signed a petition calling for political reform in December.
China has sent a number of warships to the Indian Ocean to escort ships travelling near to the coast of Somalia, after several vessels were attacked by pirates.
China's real GDP growth fell to 6.8% in the last quarter of 2008, from 9% in July-September. The economy thus expanded by 9% in 2008, down from a recently revised figure of 13% in 2007.
The government has taken a number of steps designed to support specific industrial sectors, including assistance packages for vehicle manufacturers and airlines.
Interest rates were cut in December, taking the one-year policy lending rate to 5.31%. Bank lending expanded rapidly in December as credit quotas were eased.
A number of state-owned firms have announced big cuts to executive salary levels, with workers' pay also being reduced. The government has pressured firms not to reduce their headcount.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;10;37;48
NAICS Code: 11;212;336;517