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Signs Continue to Point Downward for the Chinese Economy

Wednesday, August 15, 2012 17:21
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China, the world's largest producer and consumer of coal, has lowered its production target in 2012. The Wednesday cut means the manufacturing-reliant economy is using up less energy — in other words, the economy is slowing down. The cuts, by as much as 7%, apply to China's three top coal production regions. The National Development and Reform Commission, China's main economic planning agency, said 2012's output will increase by 3.7% from last year, at 3.65 billion tonnes. This is a big dive from the previous growth rate of 8.6%. The cut reflects a slowdown in global demands. At the close of last week, Industrial Production levels for July also trended downward, and domestic market demand decreased by 0.4%. Chinese regulators are now expected to introduce further stimulus for the economy. Analyst Gordon Chang believes there will be limited room to move. [Gordon Chang, Economics Analyst] “The real problem is China is no longer got the capability to stimulate its economy like it did in 2008 and 2009. Right now we are going to see a stimulus program, but it isn't going to an effective one. ” The sluggish demand is having flow-on effects on the country's banking industry. Non-performing loans increased by $2.86 billion in the second quarter, and combined net income across Chinese banks decreased by 23%. Chang believes all of this is point to a bleak third quarter. [Gordon Chang, Economics Analyst] “I don't know. China's going to readjust what it reports by seeing what is
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