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Thursday, March 13, 2008

China Industrial Output February 2008

China's industrial output grew at the slowest pace in over a year in January and Fenruary as exports cooled and the worst snowstorms in half a century closed factories and disrupted power supplies. Output rose 15.4 percent in January and February from a year earlier, the statistics bureau said today, after gaining 17.4 percent in December.

Industrial production may be slowing in China, but it still grew at almost triple the pace of the increase in India, the world's second fastest-growing major economy, in January, and we need to see what happens in March and April when hopefully there will be no snow blizzards or similar so we can get a true picture of what is happening.

Chinese Premier Wen Jiabao told lawmakers last week that inflation and overheating are the nation's biggest economic risks this year. Consumer prices surged 8.7 percent in February on food costs.

Slowing global growth, a U.S. housing recession and an international credit crunch may all combine to put a break on China's expansion by curbing the demand for Chinese exports. Money-supply growth cooled in China in February as the trade surplus narrowed 64 percent and exports rose 6.5 percent compared to Fenruary 2007. This was the slowest pace in almost six years.

The People's Bank of China lifted borrowing costs six times in 2007 and raised bank reserve requirements to 15 percent, the highest ever. China has also let the yuan appreciate more quickly (although many would argue not quickly enough) to reduce import costs. The currency has climbed 2.9 percent this year versus the dollar following a 7 percent gain in 2007.

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