China's economy suffers 'sharp slowdown'

Ryan Pyle  /  The New York Times

A construction worker near Xi'an, China. Many have lost their jobs because developers have been caught in a squeeze for money.

By KEITH BRADSHER

XI’AN, China — A nationwide real estate downturn, stalling exports and declining consumer confidence have produced what a Chinese cabinet adviser, quoted on the official government Web site on Thursday, characterized as a “sharp slowdown in the economy.”

Though the Chinese economy continues to expand, construction workers are losing jobs in droves and retail sales grew last month at the slowest pace in more than three years. Investments in fixed assets have increased more slowly this year than in any year since 2001.

The most striking feature of the slowdown is that it extends beyond the coastal provinces, which depend on exports and are closely linked to the global economy, to the country’s far more insular interior, including cities like Xi’an here in northwestern China.

China’s unexpected economic difficulties are starting to unnerve investors in world markets, especially commodity markets, as China is the world’s largest consumer of most raw materials and the second-largest consumer of oil.

A deepening slowdown would ripple across the world economy. Until now, China’s economy barreled ahead mostly unhindered as the main engine of global growth, even as Europe struggled with its government debt crisis and the United States limped along with a crippled housing market.

Cash squeeze Government indexes show real estate prices are falling in more than half of the country’s top 70 urban markets, Xi’an among them. Standard & Poor’s Ratings Services and Moody’s each issued reports on Thursday warning that many of China’s real estate developers face a severe cash squeeze as apartment sales slow to a crawl. The developers still owe heavy interest payments on bank loans.

“Weak property developers in China are likely to face a test of their survival this year,” S.& P. said.  More >>