The Chinese economy is to get worse before it gets better, going against growing consensus among analysts that China’s economy is out of the woods, according to an article published today in FT China Confidential. The article in the launch edition of FT China Confidential, a specialised subscription-only fortnightly electronic newsletter and website, predicts that the Chinese economy will take more time before it rebounds.

James Kynge, editor China Confidential, said “It is clear that the Chinese economy is not in a sustained period of recovery and will get worse before it gets better. If we look at the present situation we can only conclude that over the next few weeks, and possibly months, we will not see the rebound that many say is already under way.”

The prediction is based on official statistics and local research into what is happening in the real economy and concludes that the trajectory of growth is actually slightly downward and will continue to be so over the next few weeks. However there are signs that the deceleration is slowing. There are a number of factors underlying the prediction including:

•The Chinese export market fell by 17.5% year-on-year in January and with an emerging economic crisis in Eastern Europe and the similar declines in exports seen in Japan, South Korea and Taiwan, the signs are that exports will not be making a significant recovery in the near future

• The effect of declining exports is being felt domestically with an unpublished local government survey conducted in December in Wenzhou, near Shanghai, showing that 29% of local factories had cut back on production, with 18% stopping work or operating at half capacity

•These factors are having an effect inland as some 20m migrant workers have been laid off, reducing the amount of money being sent back to rural households

•The property and construction industries are continuing to be hit hard with an average 10% to 15% decline in prices from their peak in 2008, hitting developers earnings and directly effecting future investment in the sector

James Kynge continued, “There is room for optimism however. While Premier Wen did not announce any big new spending package, he did outline several new measures to boost the economy. A drastic slump in growth is not an option for a government that fears regime-threatening social unrest. The measures announced by Premier Wen are mainly aimed at stimulating consumer spending and caring for China’s less well-off. These will be positive for the economy, but they will take time to work. ”

China Confidential, launched today, is edited by James Kynge the award-winning author of “China Shakes the World” and will provide specialised predictive advice to the investment community on the Chinese economy. With access to a database of over a million people in the region, China Confidential will be able to conduct in-depth consumer research with the Chinese middle class.

To find out more about China Confidential please visit www.ftchinaconfidential.com

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For further information, please contact:

Tom Glover, Financial Times, +44 (0) 20 7775 6840 or tom.glover@ft.com

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