China and India - feel the impact of Global Recession
China has seen a sharp slowdown in industrial profit growth and fiscal income, Executive Vice President Zhu Min told a financial conference. The global economy will likely enter recession next year with the United States, Europe and Japan posting negative growth, he said.“That will have a huge impact on China,” he said.
Zhu also said currency volatility was expected to add further pressure on China’s banks, which have enjoyed robust profits for years as the country boomed. Earnings growth is now slowing as the economy cools from the impact of the crisis.
“The uncertainties in the world’s currency markets have exposed the Chinese banking sector to higher foreign asset risk,” Zhu said.
In India -- like China, a magnet for foreign investment in recent years as their economies roared -- the central bank cut its main lending rate for the second time in as many weeks to ease a cash squeeze and spur economic growth.
Analysts said the surprise move showed Indian concern that strains on its economy were quickly becoming more severe.
“These actions were necessary (and had) to be taken on the liquidity front...the situation was getting worse,” said Vikas Agarwal, strategist at JP Morgan.
The central bank cut its main short-term lending rate by 50 basis points to 7.5 percent and banks’ cash reserve requirements by 100 basis points to 5.5 percent.
“The global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability,” the bank said.
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