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China's Economy Slows as Global Crisis Hits Exports

The World Bank and a leading Washington research group say China's economic growth rate is slowing significantly, mainly as a result of reduced demand for its exports. VOA's Barry Wood has more.

In its latest forecast, the World Bank says growth in China will slow to 9.4 percent this year - down from nearly 12 percent growth in 2007. The bank says economic growth will be even slower in 2009, probably no more than 7.5 percent.

Nicholas Lardy, a China specialist at the Peterson Institute for International Economics, says growth will slow even more - to about six percent in 2009.

"So roughly, China's growth has fallen by half - from peak to where we are now," he said. "This is by far the fastest deceleration of economic growth in any time in the 30 years since reform in China began in 1978."

Fred Bergsten, Director of the Peterson Institute, says even with slower growth, China accounts for most of the world's economic growth.

"China's is the world's second largest exporter [after Germany and ahead of the United States] and is by far the largest trade and current account surplus country, with foreign currency reserves not only the largest in the world, approaching $2 trillion, but twice the amount of Japan, the next largest on that category," he said.

Bergsten praises China's recently announced emergency stimulus program, calling it a major contribution to maintaining domestic demand when the global economy is slowing.

Researcher Nicholas Lardy says China needs to permit a faster revaluation of its currency to remedy global imbalances.

"The problem here is that the undervalued currency sends a mispricing signal to the market," he said. "It boosts up profitability in the tradable goods sector, which is mostly manufactures, and we have had over the last five or six years a doubling of investment going into the manufacturing sector."

But Lardy is not optimistic that with a difficult global environment China will allow a faster currency appreciation.