Amid Crisis, China Faces Its Own Slowdown

Decline in exports poses huge challenge to Communist Party
By Jason Farago,  Newser Staff
Posted Oct 23, 2008 7:44 AM CDT
Workers process shoes at the Meilidian shoe factory in Chengdu of southwest China's Sichuan province, Monday, Oct. 6, 2008.   (AP Photo/Color China Photo)
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(Newser) – For three decades now, China has established itself as a global economic powerhouse by providing cheap exports to the rest of the world. But as demand for Chinese goods slumps in a global recession, the ruling Communist Party, which owes its popularity to expanding prosperity, faces new tests: slowing growth, rising unemployment, an epidemic of factory closings, and a stock market that's lost 65% of its value.

While Chinese banks have been insulated from the troubles abroad, analysts say a slowdown in growth below 8% will fail to produce enough jobs to keep up with increases in the working-age population. The government is expected to invest big in infrastructure projects and attempt to spur consumption by savings-happy Chinese. One worry is whether preoccupation with problems at home might lead Beijing to shift resources away from American debt. The crisis is "a ground-shaking event," says one Chinese economist.