16 Dec 2008

IMF warns China growth may halve

11:21 am on 16 December 2008

Economic growth in China could be cut almost in half next year, warns the International Monetary Fund.

Fund managing director Dominique Strauss-Kahn told a conference in Madrid that growth the world's fourth-biggest economy could fall to 5% next year from 9.7% this year.

He said a large and diversified stimulus of about 2% of world GDP, or $US1.2 trillion, was needed to reduce the risk of a damaging global recession.

"If we are not able to do that, then social unrest may happen in many places, including advanced economies," he said.

Earlier, China said its industrial output grew at the slowest pace since 1999.

In further evidence of the global downturn, Japan reported its sharpest crash in business sentiment in three decades.

The gloomy prospects for 2009 pushed US and European markets lower.

However, hopes remained that the White House would step in to prevent the collapse of the "Big Three" US car manufacturers and that the US central bank would cut interest rates this week as part of a campaign to stimulate growth.

The US Federal Reserve is on Tuesday expected to cut rates close to zero.