China's economy slowed dramatically at the end of 2008 as the full force of the global crisis hit home, dragging growth to a seven-year low, official data showed Thursday.
The world's third-largest economy expanded by just 6.8 percent in the final quarter, pulling the full-year growth figure down to 9.0 percent, the National Bureau of Statistics said.
Coming after 13.0 percent growth in 2007, the figures offered the most complete picture yet of just how severely the world crisis has hit China's export-dependent economy.
"The international financial crisis is deepening and spreading with a continuing negative impact on the domestic economy," Ma Jiantang, the head of the National Bureau of Statistics, told reporters in Beijing.
China's exports fell 2.2 percent in November, the first such drop in seven years, and the trend was extended into a second month with a 2.8 percent decline in December, according to previous data from customs.
"China's economy suffered a hard landing in the fourth quarter," said Lu Zhengwei, a Shanghai-based economist with China's Industrial Bank. It will be extremely difficult for the economy to grow this year by 8.0 percent, a figure the government has long targetted as its benchmark rate, he added.
In another sign of the precipitous decline of activity, the consumer price index, the main gauge of inflation, slowed to 1.2 percent in the December, the statistics bureau said.
China started out 2008 concerned that rising prices would be a major challenge -- inflation was at nearly a 12-year high of 8.7 percent in February -- but ended the year fearing deflation instead.
"Deflation is very likely in 2009. Deflation is not unusual... but this time it is coming so abruptly that it will have a more significant impact on the economy," said Hu Yuexiao, an economist with Shanghai Securities.
Industrial output, another indicator of foreign trade, expanded by 12.9 percent in 2008, down from 18.5 percent growth in 2007, the bureau said.
Earlier this week, Premier Wen Jiabao warned that 2009 would be "the most difficult year for China's economic development so far this century."
From the Chinese government's perspective, the most worrying aspect is the impact on employment and the subsequent potential for social unrest if millions of people lose their jobs.
Especially hard-hit are migrant workers who have left their rural homes for jobs in the big cities and now find factory gates shut all along the formerly bustling east coast.
Thousands of factories that exported to the United States and elsewhere have already closed, and many more are expected to fold in the next few months.
So far, six million migrants have lost their jobs because of the crisis, data announced by the statistics bureau Thursday showed.
China unveiled a four-trillion-yuan (580-billion-dollar) stimulus package in November to get the economy going.
"How much China can recover from the economic downturn depends on the effectiveness of government stimulus packages and expansionary fiscal policies," said Lu of the Industrial Bank.
While some of the package consisted of items that had already been announced, economists said it was significant in signalling to society a willingness to spend big money to escape the worst effects of the crisis.
Partly reflecting this, China's fixed asset investments, the main measure of public spending on infrastructure and productive capacity, rose 25.5 percent in 2008, according to the bureau.
This compared with 2007 growth in investments in fixed assets of 24.8 percent, suggesting that China's government had deep enough pockets to keep this part of the economy going at a brisk pace.
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