Growth in Eastern Provinces Will Drop to 7.7%

Guangdong, China's Export Powerhouse, Is Hard Hit by Drop in World Trade Says Economist Intelligence Unit

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HONG KONG ( -- Economic growth in China's top ten east coast provinces is slowing dramatically, from an average of 11.2% growth in 2008 to 7.7% in 2009, according to updated forecasts released by the Economist Intelligence Unit.

Among the ten east coast provinces, the poorer Bohai Rim provinces of Tianjin, Shandong and Liaoning will perform relatively well in 2009. This is part of a longer-term trend toward growth shifting away from the richer provinces. Liaoning and Tianjin will continue to benefit from government policies favoring investment in those provinces.

Guangdong's prospects are relatively bleak this year. Among the east coastal provinces, it has slipped from No. 4 in 2007 to No. 10 this year. The major cities of Beijing, Guangdong and Shanghai are weakening as well, as their exposure to the heavily-hit property sector takes a toll. Of the three, Beijing should do best in 2009, reflecting its strong service sector and less exposure to global trade.

Many export-driven provinces such as Guangdong and Fujian are suffering from the fall in global trade. Guangdong province, China's export powerhouse, is being hard hit by the drop in world trade and a sharp drop in foreign investment. Zhejiang stands out as an exporting province that is holding up relatively well.

While China's economy is slowing rapidly due to the combined impact of the collapse in world trade and a downturn in domestic construction, it remains a better place to do business than many other countries.

China's large domestic economy makes it less vulnerable to the global trade downturn than other major East Asian exporters. And China's financial system has held up better than in more developed countries. Also, the government is rolling out a stimulus package.

China will still see growth in 2009 while most of the world is mired in recession, and is likely to be one of the first major economies to show a recovery in the second half of this year.

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