China tries to revive economy despite daunting challenges (2)

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CHALLENGES

The financial crisis that originated on Wall Street and swept the world has gone beyond the toy sector and bitten into the Chinese economy.

Chinese manufacturers from other export-oriented sectors, including textiles, garments and shoes, also felt the pinch of slackening demand. Over the past two months, many labor-intensive factories have shut down, including those run by large Hong Kong-listed manufacturers, leaving massive numbers of workers jobless.

China Customs figures show exports, a major driving force of the national economy, at 1.07 trillion U.S. dollars in the first three quarters. Although 22.3 percent up from the same period last year, the growth rate was 4.8 percentage points lower.

During the same period, China's GDP growth slowed to 9.9 percent, down 2.3 percentage points from the same period last year and falling to single figures for the first time in five years.

The slowdown of the Chinese economy, the world's fourth largest, is partly due to shrinking demand from abroad and partly to worsening downward pressure from weak domestic demand, a consequence of an inadequate social security system, and higher costs of raw materials and labor, which have hurt corporate investment.

Lingering inflationary pressure reined in domestic demand, experts said. In the nine months from September 2007, the CPI had signaled caution.

China's consumer price index (CPI), the main gauge of inflation, rose 4.6 percent in September over the same period last year, the National Bureau of Statistics said. The figure was markedly down from 7.1 percent in June, 6.3 percent in July, 4.9 percent in August and a near 12-year-high of 8.7 percent in February.

"The figure indicated the government's measures to tame inflation were effective, and the inflationary pressure has been greatly eased," said Zhuang Jian, an Asian Development Bank (ADB) economist.

Despite all the difficulties and uncertainties, Chinese officials largely believe the economy remains in good shape and will maintain stable and relatively fast growth.
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