China and India 'heading for economic slowdown'

AFP/ 11:39AM BST 11 Jun 2012

http://www.telegraph.co.uk/finance/china-business/9323957/China-and-India-heading-for-economic-slowdown.html

The composite index of leading indicators, a strong guide to coming economic performance, continues "to point to divergence between economies" worldwide, the Organisation for Economic Cooperation and Development said.

"The assessment for China and India has changed significantly since last month," the OECD added, with the indicators pointing towards activity below long-term trend.

Meanwhile, indicators for Japan, Russia and the US still show an improvement, although with "tentative signs that growth may moderate in the near term", the OECD said.

In the eurozone, while indicators for France and Italy continue to point to sluggish activity, Germany and the currency bloc as a whole were only slightly below long-term trend.

The OECD, which groups the world's most developed countries, said Brazilian data pointed towards a turning point, with economic activity improving to nearer long-term trend but with a weaker intensity.

The reports came as China's commerce minister said that the country faces a "severe" trade situation this year, as the Asian powerhouse continues to feel the pinch of global economic woes.

"Foreign trade still faces quite a severe situation going forward," Chen Deming said.

But he said that "with luck", China would still achieve 10pc growth in foreign trade - which combines imports and exports - in line with predictions made earlier this year.

The forecast growth for the year ahead is far slower than the 22.5pc growth achieved in 2011, as the debt crisis in Europe - China's biggest export market - continues.

Official data released on Sunday showed exports rose 15.3pc year-on-year in May to $181.1bn and imports grew 12.7pc to $162.4bn, slightly widening the trade surplus for the third consecutive month to $18.7bn.

However, the better-than-expected trade figures failed to downplay concerns that the world's second largest economy is slowing, after China put in a poor economic performance in May.

Chinese Premier Wen Jiabao last month said greater priority should be given to growth, which slowed to 8.1pc in the first quarter of 2012 year-on-year - its slowest pace in nearly three years.

Authorities have been easing monetary policy for some time in an effort to stimulate growth, cutting the amount of money banks are required to keep in reserve three times since December last year.

On Friday, the central bank also cut interest rates for the first time in more than three years and allowed banks more flexibility to set rates, introducing greater competition in the market.