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Global Financial Crisis Drops China's Economic Growth to Slowest Pace in 5 Years


China's economy is growing at its slowest pace in five years as exports have fallen with the global slump. But, as Daniel Schearf reports from Beijing, China is making new attempts to boost domestic spending.

China's economy grew by nine percent in the third quarter of this year, down a full percentage point from the second quarter.

Industrial production growth for September slowed to 11.4 percent, the lowest in several years.

The quarterly economic expansion was the weakest since 2003, when China was hit by the SARS outbreak. It now appears this year economic growth will fall below 10 percent for the first time since 2002.

Last year, China said its gross domestic product grew by almost 12 percent, but in the first nine months of this year growth was just under 10 percent.

Growth in exports dropped almost five percent in the first three quarters, compared with the same period last year.

Li Xiaochao, a spokesman for China's National Bureau of Statistics, told journalists Monday the global financial crisis, which started in the United States, is largely to blame.

He says fast export growth has been a driving force for China's economic growth in the past few years and accounts for a large share of China's GDP. However, he says, because of the global financial crisis, and subsequent economic slowdown, there will continue to be a negative effect on export growth.

While economists usually consider nine percent growth to be healthy, China needs to keep growth rates high to absorb millions of jobless workers and lift underdeveloped regions out of poverty. So any decline sends off alarm bells for the government.

Beijing has cut taxes for exporters and increased spending on infrastructure in attempt to stabilize the economy. The central bank also has trimmed interest rates.

Li says inflationary pressure is cooling as growth in consumer prices dropped from a 12-year peak in February.

He says in September it fell to 4.6 percent, indicating the government's efforts to control inflation are showing obvious results.

The Chinese government is trying to boost domestic demand to take up the slack in exports and may be starting to see some sign of success.

Retail sales were up 23 percent last month from a year earlier, the fastest pace in nine years.

China wants to see more spending in the countryside, where incomes remain just a fraction of urban incomes.

In an effort to close the income gap, Beijing for the first time will allow farmers to directly rent out or trade their land rights.

China's farm land is collectively owned and community leaders must approve any land transfers.

Few details have been released on the new land policy. But, if carried out, it could free up assets for hundreds of millions of farmers.