China's industrial growth slows further

Growth in China's factory output fell to its lowest level in nearly seven years as trade plunged, data showed today, adding to the threat of heavy job losses that could fuel unrest.

Industrial output rose 5.4% in November from a year earlier, down from October's 8.2% growth, the National Bureau of Statistics reported. An employee of the bureau who refused to give his name said it was the smallest monthly expansion since February 2002, when factory output grew by 2.7%.

The industrial weakness could have a global impact as Chinese factories stop buying foreign raw materials. Manufacturing makes up 40% of China's economy and employs tens of millions of people, and the potential loss of paychecks could undermine government efforts to shield the country from the global downturn by encouraging Chinese consumers to spend more.

Factory output may have started to shrink in December, according to Moody's Economy.Com economist Sherman Chan.

"More and more job cuts in the manufacturing sector which will curb consumer demand will have wide ramifications in the domestic economy," Chan said in report. "Beijing will need to do all they can to revive sentiment and prevent social unrest."

Communist leaders have warned of rising instability due to job losses and are pressing employers to minimise layoffs as Beijing rolls out measures to insulate China from the global economic slowdown.

A slowdown in industrial growth was expected after China's exports fell in November for the first time in seven years.