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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Slowing China Slashes Interest Rates

If anything has been certain over the past decade, it's been the double-digit growth surge of the Chinese Dragon.

Fueled by cheap labor and an authoritarian government creating -- out of whole cloth -- a patronage-based laissez-faire capital market, China has become the world's manufacturer. With its accumulated wealth, China has also become the world's largest holder of U.S. debt.

So when growth stalls even just a little in China, the world shudders.

Today, China announced its biggest interest rate cut in 11 years, the fourth cut in three months, in a bid to spur borrowing and get the dragon roaring again.

China's economy was growing at a runaway rate of nearly 10 percent per year before the global financial crisis hit.

Earlier this week, however, the World Bank reduced its 2009 GDP growth forecast for China from 9.5 percent to 7.5 percent, the lowest level since 1990.

What's happening in China? It's pretty simple: If the world has less disposable income to spend, it's going to buy fewer things made in China. If production drops in China to match decreased demand, China buys less coal from the U.S., harming the coal, shipping and rail industries here, and the cycle feeds on itself.

-- Frank Ahrens
The Ticker is Twittering!

By Frank Ahrens  |  November 26, 2008; 12:30 PM ET
Categories:  The Ticker  | Tags: China  
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