The risk that the Chinese economy may be subjected to a marked slowdown in the coming months is rising amid deteriorating external conditions, the Conference Board warned Tuesday while releasing its leading indicator for the economy.
The Conference Board said that its leading economic index decreased 0.1 percent in October to 160.1, following a 0.4 percent increase in September and a 0.6 percent rise in August.
Three of the six components contributed positively to the index in October. Consumer expectations continued to decline, and the manufacturing and export indicators also contributed to the slight drop in the index in October.
"The risk of a more substantive slowdown in China's economic growth than anticipated so far is rising amid deteriorating external conditions and domestic real estate tightening," Conference Board China Center resident economist Andrew Polk said.
"Targeted loosening of credit markets by the authorities should provide marginal aid to struggling enterprises in the coming months, but the pass through from previous policy tightening measures will continue to act as a brake on the economy," Polk noted.
The central bank hiked key policy rates five times since October last year and also expanded property curbs and tightened credit policies to rein in stubbornly high inflation and to avoid property bubble.
Though inflation eased, tight policy conditions trimmed growth in Asia's biggest economy. The GDP growth fell to a two-year low of 9.1 percent in the third quarter.
Meanwhile, in view of the deteriorating global economic prospects and debt turmoil in Eurozone, the People's Bank of China reduced banks' reserve requirements for the first time in nearly three years this month.
The Conference Board coincident economic index, which measures current economic activity, increased 0.1 percent in October to 207.7, after a 0.5 percent increase in September and a 0.4 percent increase in August.
According to Ministry of Commerce, China will face severe challenges in international trade in 2012. The expectations for an export slowdown reflected weak external demand, the strong yuan and rising labor costs, Foreign Trade Department director Wang Shouwen said last week.
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