China's economy may have expanded at its slowest pace in seven years in the fourth quarter as exports collapsed, undermining growth across Asia.
Gross domestic product grew 6.8% from a year earlier, according to the median estimate of 12 economists surveyed by Bloomberg News, down from 9% in the previous three months. The data is due to be released this week.
Plummeting Chinese demand for parts and materials for exports is driving Taiwan and South Korea closer to recessions and worsening Japan's economic slump. After vaulting past Germany to become the world's third-biggest economy in 2007, China may this year face its first drop in shipments since at least 1990.
``China's era of hyper-growth is coming to a sudden, very disruptive end,'' said Kevin Lai, an economist with the Daiwa Institute of Research in Hong Kong. ``China's imports are slumping dramatically and the rest of Asia relies on it very significantly.''
The slowdown from the previous three months would be the sharpest since quarterly data began in 1994. The pace compares with 13% growth in 2007.
Easing inflation, which the survey estimates fell to 1.6% in December from a decade high of 8.7% in February, gives room for more interest-rate cuts. The key one- year lending rate is 5.31% after five reductions from September.
China may add to the 4 trillion yuan ($865 billion) stimulus package announced in November and limit the yuan's gains against the dollar to aid exporters.
Besides the export slowdown, slumps in stocks and property are undermining consumer confidence and growth.
``Exports are not going to recover any time soon and the property market is struggling,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. ``More easing is needed because demand won't return in a hurry.''
Exports will decline 6% this year, down from a 17.2% gain in 2007, Fitch Ratings said Jan. 16.
Among the biggest losers from China's waning demand are Taiwan, which shipped almost 36% of its exports to China in 2007; South Korea, which sent 25%; and Japan, which shipped 19%, according to UBS AG.
Goldman Sachs Group Inc. forecasts the South Korean economy will contract this year, its first recession since the 1997-1998 Asian financial crisis. Taiwan probably slipped into a recession in the fourth quarter, its government said.
China's imports from Taiwan fell 44.3% in December. Shipments from Korea declined 30% and those from Japan dropped by 15.4%. Exports were 2.8% lower, the biggest decline in almost a decade.
At home, as many as 4 million migrant workers lost their jobs last year as factories closed and that figure is likely to jump another 5 million in 2009, according to Credit Suisse AG.
Social stability ``is clearly an issue,'' James McCormack, the Hong Kong-based head of Asian sovereign ratings for Fitch, said Jan. 16. ``There is a question of how easy it is to redeploy millions or tens of millions of unemployed factory workers to infrastructure construction products that may be located elsewhere in the country.''
The CSI 300 Index of stocks has fallen 63% since the beginning of last year. House prices across 70 cities dropped for the first time on record in December and construction will contract 30% this year, according to an estimate by Hong Kong-based Macquarie Securities property analyst Eva Lee.
China Vanke Co., the nation's biggest real-estate developer, said last year that the housing market was ``in recession'' as sales and profits fell.
The economy may grow 6% this year, the least since 1990, according to Fitch.
Still, there are signs that a revival is possible. Bank lending and money supply jumped more than economists estimated in December as money flowed into infrastructure projects.
The nation's arsenal for fighting the global recession spans a world-record $US1.95 trillion of currency reserves and state control of the biggest banks.
Bloomberg News