China grows slowest in 5 yrs

China’s economy, the biggest contributor to global growth, expanded at the slowest pace in five years as the financial crisis cut demand for exports.

Gross domestic product rose 9 per cent in the third quarter from a year earlier, the statistics bureau said in Beijing today. That was less than any of the 12 estimates in a Bloomberg News survey and the 10.1 per cent gain in the previous three months.

The fifth quarter of slowing growth may exacerbate declines this year in iron ore, copper and oil prices and undermine demand for exports within Asia, where economies are already contracting. The cabinet announced yesterday increased infrastructure spending and tax cuts for exporters and the central bank may be poised to cut interest rates for the third time this year.

“This will shake confidence and underscores that no one is immune,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong. He predicts three more rate cuts by the middle of next year and a further easing of lending restrictions.

Inflation cooled to 4.6 per cent in September, the slowest pace since June 2007, on easing commodity prices.

The CSI 300 Index of stocks climbed 3.1 percent as of 2:54 pm in Shanghai on speculation that stimulus measures will aid companies’ profits. The yuan traded at 6.8295 against the dollar from 6.8296 before the data was released.

Growth is slowing across Asia, where Japan's economy shrank in the second quarter and Singapore has tumbled into a recession.

Financial market turmoil and a global slowdown “have started to have a negative impact on China’s economy,” Li Xiaochao, a statistics bureau spokesman, said. “The sub-prime crisis that broke out last year in the US is still spreading and deepening.”

China’s expansion was the weakest since the severe acute respiratory syndrome, or SARS, epidemic slashed growth in the second quarter of 2003. The median estimate of the economists in the survey was for growth of 9.7 per cent.

The contribution of trade to growth halved to 1.2 percentage points in the first nine months from a year earlier. Export growth may slow “substantially”, Li said.

Industrial production rose 11.4 per cent in September, the slowest pace in more than six years excluding seasonal distortions, on weaker export orders and factory closures to clear the air for the Olympic Games.

Growth in urban fixed-asset investment accelerated to 27.6 per cent in the first nine months from a year earlier, today’s data showed, from 27.4 per cent through August. Railway and earthquake reconstruction spending may help to sustain that pace.

Retail sales rose 23.2 per cent in September, close to the fastest pace in at least nine years. Producer prices rose 9.1 per cent last month, down from a 10.1 per cent gain in August.