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Wednesday, October 15, 2008

Rio Tinto Give China Slowdown Warning

Rio Tinto’s chief executive, Toma Albanese, warned on Wednesday about the health of China and said the slowdown in one of the world’s fastest growing economies had led the mining company to revise its capital spending plans. Mr Albanese said there had been a marked reduction in Chinese commodity demand from the overheated levels of 2007 and added that the “vast majority of Chinese aluminium producers are now making operating losses.”

As the credit crisis unfolded over the past year, one of the few certainties in the global economy seemed to be China’s ability to plough on regardless at double-digit growth rates. Not any more. With Wall Street in tatters and Europe’s and Japan’s economies faltering, many investors are beginning to ask if China too might stumble badly. After five turbo-charged years of accelerating growth, the Chinese economy is clearly slowing.

Housing Market Evidence of Slowdown

The local government in Shanghai yesterday raised its ceiling on mortgage lending to households under a government-run program, uping available funding by 20 percent in an attempt to encourage families to buy apartments in the city. Eligible households will be allowed to borrow as much as 600,000 yuan ($87,679) starting today, up from 500,000 yuan, the city's public housing fund agency said in a statement yesterday.

Under Shanghai's mortgage program, most households are allowed to spend as much as 7 percent of their monthly salaries to repay loans. Employers must match workers' contributions and borrowers receive preferential bank lending rates. Households meeting certain requirements can spend as much as 15 percent of salaries, and they are the ones eligible for the new ceiling.

The loan program covered 3.42 million people at the end of June, according to the agency. About 8.8 percent of people covered make the larger repayments, the Shanghai Daily said in June, citing the housing agency.

Housing prices in Shanghai, China's biggest financial center, fell 19.5 percent in the third quarter from the previous three months as the volume of sales slumped, real estate broker Savills Plc said yesterday. Average transaction prices, which rose to a record in the second quarter, dropped to 9,092 yuan per square meter, the London-based broker said in a report.

The volume of transactions slid 39 percent from the second quarter and two-thirds from the same period last year to 2.9 million square meters, according to Savills.

China's stocks also fell for a second day today, with metal producers leading the way, on concern profits will decline as economic growth slows.

Jiangxi Copper Co., China's second-biggest producer of the metal, slid 5.9 percent after copper and zinc futures slumped by the exchange-imposed 4 percent daily limit in Shanghai. China Shenhua Energy Co., the nation's largest coal producer, fell 3.2 percent as more affordable oil reduced the allure of alternative energy sources. Citic Securities Co. fell 2.9 percent after a second competitor in as many days reported a slump in profit.

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