China slows down as Europe’s debt rises | business | Hindustan Times
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China slows down as Europe’s debt rises

business Updated: Nov 25, 2011 00:33 IST
Keith B Richburg
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Exports are down. Some small factories have closed. Growth projections for next year have been lowered. Foreign exchange reserves have lost their value.

And in a further sign of just how badly the continuing debt crisis in the euro-zone economies is affecting China, a few economists here are even speculating that China could soon see its first trade deficit in two decades.

“The shrinking European market will definitely have an impact on China’s exports, and we should be prepared for it,” said Teng Tai, an economist. He said the falloff in demand from Europe “will be painful.”.

Any slowdown in China could also be felt more widely, because of its role in recent years as a principal engine of global economic growth.

Some businessmen and economists said the latest global slowdown would accelerate China’s switch from an economy dependent on exports to one fueled by domestic consumption.

China continues to run a trade surplus, expected to be about $150 billion this year. But that surplus has declined for three years running, and the slide of exports to Europe, combined with continuing weak demand from the United States, has at least some economists here warning about a sharper slide that might even lead to a trade deficit, something recently considered unthinkable.

A World Bank report this week lowered the growth forecast for China to 9.1% this year and 8.4% for 2012, mainly because of the concern about the debt problems in Europe.

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