Economy lags even before the Games begin

MANY Chinese have been expecting a post-Olympic economic slowdown, but it has already started and the Games have not even begun.
Chinese factories reported a plunge in new orders last month. Exports are barely growing. The real estate market is weakening, with apartment prices sinking in south-eastern China, the region hardest hit by economic troubles.
The trends actually have little to do with the Olympics, and they are being felt worldwide; the Games themselves - which open on Friday - are small compared with the size of China's economy.
China's slowing growth is one reason petrol prices have fallen in the US. Similarly, world prices for metals like copper, tin, zinc and aluminium have tumbled in recent weeks, as voracious Chinese factories have closed or cut back consumption.
But while China's difficulties may reduce inflationary pressures around the world, they threaten to slow further the already tenuous global economic growth.
"China has slowed down a lot already, but it's going to slow down more," said Hong Liang, the senior China economist at Goldman Sachs.
Economists expect growth to slip from its recent pace of 11 per cent or more annually to about 9 to 9½ per cent over the coming year.
Most nations would envy that rate. But 9 per cent growth will make it much harder to supply jobs to the millions of Chinese moving to cities from rural areas in search of work. And any slower growth could prove a shock to workers who have been receiving double-digit pay increases each year, as companies struggle to find enough labour to keep factories open.
How it manage the slower economy, and its effect on China's 1.3 billion people, will be a test for the Government. It seems to be responding quickly.
A politburo meeting on July 25 replaced the previous national economic goals - which prevented the overheating of the economy and controlled inflation - with new targets. As enunciated by President Hu Jintao in recent appearances, the objectives now are to seek fast and sustained economic growth while still keeping inflation under control.
"We must maintain steady, relatively fast development and control excessive price rises as the priority tasks of macro adjustment," he said.
Having put a series of brakes on the economy over the last five years to keep inflation under control, Chinese policymakers are now removing some to prevent growth from slowing too much.
For example, after letting the currency rise against the dollar in the first half of this year, China's central bank pushed it down against the dollar in each of the last four trading days, including a decline of 0.13 per cent on Monday. This keeps Chinese exporters competitive in foreign markets, even at the risk of angering trading partners.
The New York Times