Page last updated at 12:54 GMT, Thursday, 13 November 2008

China startled by force of crisis

By Michael Bristow
BBC News, Beijing

A group of Chinese migrant workers return home after they were laid off from factories in southern China's Guangdong province on Thursday
As industrial output drops, workers are being laid off

Chinese Premier Wen Jiabao says the effect of the global financial crisis on China is "worse than expected", according to reports.

It is the first time the premier's personal view on how the crisis is affecting China has been made public.

His words come days after the country announced a $586bn (370bn) stimulus package to avoid the economy slowing.

China's growth rate is still high compared to other countries, but economic expansion slowed this year.

According to the state-run China Daily, Premier Wen gave his downbeat assessment to government staff at a briefing on Tuesday.

Slowing down

It shows how the fortunes of the world's fourth-largest economy have changed dramatically in a short space of time.

It is not long ago that China was introducing measures to cool down an economy that grew by 11.9% last year. But that figure fell to just 9% in the third quarter of this year due to a slowing of export and investment growth.

The governor of southern Guangdong Province, where many of China's factories are based, recently said that orders had fallen sharply this year. Many companies in the province have closed down, leaving thousands of people, mostly migrant workers, without jobs.

China's fear is that increasing unemployment will lead to social instability, as it did when many state-run firms were closed a decade ago.

To offset the slowdown, over the last few months China has introduced a range of measures to boost the economy, such as cutting interest rates.

But the sudden global financial crisis meant the government had to act further.

The 10-point stimulus plan will see the government loosen credit controls, spend more on infrastructure projects and cut taxes.

It also hopes to persuade Chinese shoppers to spend more.

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