CORRECTED: China growth to slow; mining mega-merger a
Written on November 27, 2008
Slowing Chinese growth and confirmation of major nations contracting painted a bleak economic picture on Tuesday, a backdrop which miner BHP Billiton cited in abandoning a mega-bid for Rio Tinto.
Amid the worst financial crisis in 80 years, BHP Billiton called off its $66 billion hostile bid for rival Rio, a move which caught markets on the hop.
“We have concerns about the continued deterioration of near-term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve and the risks that these issues imply for shareholder value,” BHP Chairman Don Argus said in a statement.
China, the world’s biggest consumer of many metals, this month unveiled a 4 trillion yuan ($586 billion) spending package to prop up its economy, but growth would still likely slow to around 7.5 percent in 2009, the World Bank said.
That would be China’s slowest growth since 1990 and below a pace of 8 percent that conventional wisdom suggests is needed to absorb newcomers to the workforce.
With economies flagging, stimulus measures continue apace.
After Britain announced on Monday a 20 billion pounds fiscal boost, including a 2.5 points cut in value-added tax, the United States and European Union will put their shoulders to the wheel free business cards.
U.S. Treasury Secretary Henry Paulson plans to announce on Tuesday a program to increase the availability of auto loans, student loans and credit cards, the Wall Street Journal reported, citing people familiar with the matter.
The U.S. Treasury will contribute between $25 billion to $100 billion to the facility from its $700 billion Troubled Asset Relief Program, the paper said.
The European Commission will propose on Wednesday measures to stimulate the recession-hit European economy including VAT cuts and a call for lower European Central Bank rates.
A draft proposal, seen by Reuters, did not specify the size of the stimulus plan, which Germany said last week could be worth some one percent of European Union GDP.
RECESSION A REALITY
That more action is needed to curb recession worldwide is not in doubt.
The second snapshot of third-quarter U.S. economic activity, due at 1330 GMT, is expected to show the economy shrank a little more than first estimated in the third quarter, by 0.5 percent rather than 0.3, driven by a sharp drop in consumer spending.
Filed in: money.