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China’s forex touches record $1.91 trillion

This week China also revealed another record. Its foreign exchange reserves, the world’s largest, hit a record $1.91 trillion by September end, reports Reshma Patil. Pink-slipped?| China's combat

world Updated: Oct 19, 2008 01:35 IST
Reshma Patil
Reshma Patil
Hindustan Times

The Chinese worker who made your child’s Mattel doll probably lost his job this year in south China’s toy towns, where factories are sinking with the US economy.

This week, the world’s largest toy-exporting nation said half its toy exporters shut shop this year, as its second-largest trade partner slips into recession.

“We were making toys on Tuesday, we didn’t know the boss had gone into hiding,” Smart Union worker Du Haiqun told the media outside her factory.

On Wednesday, Smart Union closed two factories with 7,000 workers who made toys for clients like the US major Mattel. Only 3,507 toy exporters still survive.

This week China also revealed another record. Its foreign exchange reserves, the world’s largest, hit a record $1.91 trillion by September end.

Car prices in the world’s second-largest automobile market are slumping, real estate remains unsold, trade fairs have less buyers, fresh graduates can’t find jobs and stock market investors have lost savings — but the dragon’s not crouching.

The slowdown won’t hit the world’s factory “severely”, said Beijing-based James McGregor, author of One Billion Customers: Lessons from the Front Lines of Doing Business in China.

Unlike India, where the prime minister has said nothing about the downturn, the Chinese leadership talks every day about confidently combating the crisis — and focusing on rural reforms to expand demand.

The staid government-owned Beijing Review has a panda in a kung fu kick on its latest cover. Its title: Fighting Back.

“The bottomline is that China will come out of this a lot stronger,” said McGregor, also the CEO of research firm JL McGregor & Company. “The domestic consumer economy is stronger than the numbers show. And the government will continue building infrastructure.”

In Shanghai, an Indian exporter who sources raw materials from China, converts them into garments in factories across Asia and sells them in US supermarkets, told HT that margins are lower and raw materials costlier. “But business is still not bad,” said Dhaivat Desai, resident director of TCW Shanghai.

“Growth in China, while slowing, is expected to remain quite robust based on domestic demand,” Vivek Arora, the Beijing-based senior resident representative of the International Monetary Fund told Hindustan Times.

At the World Bank in Beijing, economist Louis Kuijs told HT: "We expect worse times to come… but China should be able to grow at high single-digit rates even next year." "Though China's financial system is not directly influenced by the world's economic turmoil, its real economy is significantly affected," said Kuijs.

If you happen to live in Bejing and earn in dollars - as this correspondent does - and not the rising yuan, the salesgirls laugh.

The IMF world economic outlook released last week projects China's economic growth at 9.7 per cent in 2008 and 9.3 per cent next year. That's lower than the 11.9 per cent growth last year.

While India's Jet Airways was giving pink slips this week, Air China warned it would post a nine-month loss.

But an hour away from Beijing, the first Airbus assembly line outside Europe — built on farmland, in 15 months — opened this month, and aims to assemble 44 giant aircraft a year by 2011.

Meanwhile, the ordinary consumer is cautious. "Consumers fear the situation may get worse next year" Li Yuefei, regional manager, Chang'an Ford, Shanghai, told China Daily this week.

First Published: Oct 19, 2008 00:54 IST