World crisis deepens as downturn hits China
2009-01-22

Nations China Australia Germany Portugal France Japan South Korea Singapore Greece Spain City Paris Tokyo Category Regions Regions Asia Pacific Rim Oceania Europe Ile-de-France Tokyo Prefecture Metropolitan Beijing Source (AFP)

BEIJING (AFP) - Grim economic news from China and upheaval for banks in Europe showed the global financial crisis hitting ever harder on Thursday, though stock markets rebounded after two days of losses.

China's powerhouse economy slowed dramatically at the end of 2008, dragging growth of the world's third-largest economy to a seven-year low, official data showed, in a disturbing sign of the current downturn's strength.

In Europe meanwhile there were fresh signs of upheaval in the financial sector, where banking shares dragged down markets worldwide this week owing to concern that further losses will lead to more nationalisation.

Belgian regional authorities moved on Thursday to bail out lender KBC, providing up to 3.5 billion euros (4.6 billion dollars) after its shares collapsed.

Germany was reportedly working on a new rescue package for its banks as last year's 480-billion-euro (625-billion-dollar) effort has failed to get them lending.

In China as many as six million people from the countryside have lost their jobs in the cities, the National Bureau of Statistics said, revealing 2008 data that showed its export-dependent economy hammered by a slowdown in demand.

After its breathtaking economic growth in recent decades, China had been widely tipped to ride out the world economic slowdown that has dragged some of the world's biggest economies into recession.

With the Asian giant now gravely suffering too, signs emerged on Thursday of a knock-on effect to others that have benefited from its boom.

Australia's Finance Minister Lindsay Tanner said that weakening growth in China -- a massive consumer of Australia's coal and iron ore -- meant the slowing of a key driver of Australian growth.

"Today's GDP numbers from China are bad news for jobs in Australia and bad news for economic growth," Tanner told reporters.

"They confirm that the Chinese boom that had supercharged Australia's economy over the past five to seven years is receding rapidly."

National Australia Bank group chief economist Alan Oster described Asia's economic health as "poor -- and decelerating quickly."

Japan meanwhile warned it was facing a two-year recession and announced new measures to repair battered credit markets, after announcing a 35-percent plunge in exports in December.

South Korea said its economy was in the worst shape since the East Asian financial crisis a decade ago. Singapore announced a 13-billion-dollar stimulus package and said it would for the first time tap its vast financial reserves.

In Europe, the US-born financial crisis revealed that it had further to run, as Portugal on Wednesday followed Spain and Greece in having its sovereign debt downgraded by the ratings agency Standard and Poor's (S and P).

There have been concerns that such downgrades could increase strains in the 16-nation eurozone where investors are already discriminating between weaker and stronger debtors, with powerhouse Germany paying less interest on its bonds than the rest of Europe.

The Portuguese government said the downgrade "was the result of a global crisis without precedent."

Despite the miserable economic data, Asian stocks rose Thursday as investors reacted positively to a strong 3.51 percent jump on Wall Street and sought bargains following two days of heavy losses.

Tokyo's Nikkei finished 1.90 percent higher, Sydney rose 1.3 percent and Hong Kong 0.6 percent.

In Europe, London's FTSE 100 index was up 1.84 percent in early afternoon trade. Frankfurt rose 1.58 percent and Paris 1.48 percent.