China warns of worse to come for its economy

BEIJING (AFP) - - China's economy slowed further in November, the nation's top planner said Thursday, as he warned the government was being forced to act to avoid massive unemployment and social unrest.

Zhang Ping, the minister in charge of the National Development and Reform Commission, made the sombre remarks at a briefing explaining recent measures to trigger domestic consumption and lift economic growth.

"In November, a number of economic indicators are showing accelerated decline. The production at some enterprises has encountered difficulties, especially enterprises that focus on exports," he said.

Zhang was speaking a day after China announced a 108-basis-point interest rate cut -- the steepest in 11 years -- and a few weeks after an unprecedented four-trillion-yuan (590-billion-dollar) stimulus package.

With China's economy headed towards what could become its biggest crisis in two decades, observers said Zhang's remark was significant and a warning of bleak economic data for November, to be published in the coming weeks.

"Zhang certainly gets to see November figures earlier than the rest of us," said Ma Qing, a Beijing-based analyst with consultancy CEB Monitor Group.

October figures were already far from stellar, demonstrating just how vulnerable China was to the global financial meltdown.

In one example, China's industrial output grew by just 8.2 percent in October from a year earlier, a steep decline compared with 17.9 percent year-on-year growth in October 2007.

China's economy, the world's fourth-largest, expanded by 9.0 percent in the third quarter, the lowest level in more than five years.

The World Bank this week said it expected the Chinese economy to grow by 9.2 percent in 2008 before hitting a 19-year low of 7.5 percent in 2009.

Amid the slowdown, Zhang warned there would be more job losses and potentially a rise in social unrest across the nation of 1.3 billion people.

"Some companies have stopped all or part of their operations, and this will naturally have an impact on employment. In some areas we're seeing rural workers returning back home to the countryside," said Zhang.

He defended measures taken in the south of China to support struggling enterprises, with reports of local governments earmarking major funds aimed at keeping them in business.

"I think it's necessary. If too many enterprises suspend business or stop production, it will result in large-scale unemployment, and it could trigger social instability," he said.

Warnings have increased recently from senior Chinese policy-makers about the impact the global economic crisis will have on the domestic economy.

Last week, social security minister Yin Weimin said the employment situation was already "critical" and that the full fall-out from the crisis still remained to be seen.

In Chinese cities, there is a need for 24 million new jobs every year, but currently there is only capacity to create half that number, according to official estimates.

In an indication of the kind of unrest that might be in store for China, 500 workers stormed a toy factory in the south this week, smashing windows and computers, in protest over what they called meagre severance packages.