China's Commerce Ministry warns US slowdown could hit exports, GDP

China's Commerce Ministry warns US slowdown could hit exports, GDP

	Published : Fri, 16 Nov 2007 02:26 By : Agencies Print this Story

BEIJING (XFN-ASIA) - A slowdown in the US economy in coming months could cause a sharp drop in Chinese exports that could cut China's growth significantly, a research report by the Ministry of Commerce warned.

'If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders,' according to report, written by the Chinese ministry's policy research department and published on the ministry's website.

'A global economic slowdown will be the biggest challenge to China's economy next year. If exports see a sharp decline, it could suggest a turning point for this round of our economic growth,' the report said.

The US imports about 20 pct of Chinese exports, making it the second largest destination after the European Union.

Growth in Chinese exports to the US has been on a downward path all year, especially with the outbreak of the US subprime crisis, with the growth rate falling from 20.4 pct year-on-year in the first quarter to 15.6 pct in the second and 12.4 pct in the third.

The report also warned that continued US Federal Reserve rate cuts will increase the difficulty in Chinese macro-economic control.

'US interest rates are moving in the opposite direction from our interest rates and this will offset our efforts to control domestic inflation and overheating property and stock markets, increasing the difficulty of (overall) macro-economic control,' the report said.

It also warned that continued turmoil in developed countries' financial markets will drive more hot money into China as a safe haven, further challenging government financial control.

Official newspapers have already reported some of the findings of the ministry's study.

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