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China economy: weak and weaker

Don't look now, but the world's second-largest economy isn't doing so well.
China economy slowsEnlarge
A Chinese stock investor checks his share prices at a security firm in Hefei, east China's Anhui province on February 22, 2012. (STR/AFP/Getty Images)

Maybe China's leaders —currently embroiled in a complex leadership transition — should worry less about politics at the moment, and more about economics.

The latest numbers out of Beijing today are anemic, particularly on the domestic economy. 

Here are two key stats to consider:

Growth in April exports fell to 4.9 percent measured year-on-year, down from a growth rate of 8.9 percent in March.

That's not too surprising, considering China's close trade ties with Europe, which is in the midst of a severe economic slump. After all, it's hard for the Chinese to sell stuff to Europeans who don't have money to spend.

But the more troubling figure has to do with imports in China, which rose just 0.3 percent year-to-year. That's the lowest number since October 2009, when the world was reeling from the global economic crisis.

Moreover, analysts were expecting a much larger gain of 11 percent, so the sharp slowdown at home is telling.

Here's what Alistair Thornton, China economist at IHS Global Insight in Beijing told Reuters in classic econo-speak:

"We know the external climate is not particularly conducive to strong export growth and digging into the data you can see primarily it is a euro zone story, which is to be expected. But the headline number on import growth is less expected and more worrying. It does point to a real weakness in the domestic economy and shows that we have not yet turned the corner into a sustained recovery."

And, as the New York Times points out this morning in a wide-ranging and smart analysis, demand is slowing for iron ore, semiconductors and other goods.

“The business environment is getting tougher and tougher,” Tom Zhang, the sales manager at Hebei Haihao High Pressure Flange and Pipe Fitting Group told the New York Times. “Competition is very intense to get more business — our domestic sales are down from last year, though our export sales are more or less stable.”

So why does this matter?

As the world's second-largest economy after the US, what happens in China affects much of the world — from neighboring Asian countries with close economic ties to China, to countries like Australia and other resource-rich places that depend on Chinese demand for growth-fueling minerals and oil.

And, of course, it matters to the thousands of businesses across the US who rely on China in one way or another. It also matters to Washington's increasingly complex economic and political relationship with Beijing.

Remember: what happens in China, does not stay in China.

http://www.globalpost.com/dispatches/globalpost-blogs/macro/china-economy-its-looking-weaker

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