China Reports Slowest GDP Growth in Six Years

The latest GDP numbers from China's statistics bureau confirmed that the Chinese economy has continued to slide. In the fourth quarter 2008, GDP grew by only 6.8%, significantly down from 9% in the prior quarter, as the global demand slump hurt China's export-driven manufacturing sector. For the full year 2008, China's GDP still grew by a respectable 9%, but the pace is the lowest in six years. Just a week ago, the statistics bureau had revised the 2007 GDP growth rate upward to 13% from the previously announced 11.9%.

On the pricing level front, inflation concerns have all but evaporated, as the consumer price index (CPI) rose by only 1.2% in December, down from 2.4% in November. For 2008, the CPI rose by 5.9%, mainly due to supply disruption caused by natural disasters in the first half of the year. The producer price index (PPI) dipped into negative territory in December, down 1.1% year over year, which indicates further weakening of production activities. This, together with declining power generation in late 2008, has led many to raise concerns about the health of China's manufacturing sector. PPI rose by 6.9% for the full year 2008.

Market Recap
The Chinese stock market rose slightly over the past week. Despite some disappointing GDP numbers for 2008, the market took comfort in the fact that the numbers were not worse than expected. A new stimulus package aimed at improving health care for Chinese consumers also helped lift the market in the latter half of the week. The Shanghai Composite Index rose by 2% to 1,990, while the Shenzhen Composite Index grew by 1.4% to 7,015.

Health Care
China Unveils New Reform on Health-Care System
China's state council this week announced that it will spend CNY 850 billion ($120 billion) over the next three years to build basic health-care coverage for all its urban and rural residents. While details of the reform are sketchy, the government has pledged to improve services in public hospitals, expand the network of local clinics, and make medicines and medical services more affordable.

Financial
China and HK Establish Currency Swap
A CNY 200 billion ($30 billion) currency swap was established this week between China's central bank and the Hong Kong Monetary Authority to help each other ease liquidity constraints when necessary. The agreement also indicates the expansion of yuan-denominated trade between Hong Kong and the Chinese mainland, but there is no timetable for trade settlements in the yuan currency yet.

Technology
HK Awards Three Licenses for Broadband Wireless Access
The license winners are  China Mobile's  HK subsidiary, Genius Brand, and CSL. They will each need to shell out about HKD 500 million for the license. Industry analysts say the operators will likely deploy the LTE technology for the high-speed wireless network within five years.

Consumer
Chinese Dairy Producers Warn of Huge Losses
Troubled by the tainted milk scandal that erupted in September, China's largest dairy producers Yili and Mengniu forecast losses of CNY 2.3 billion and CNY 900 million, respectively, for 2008.

Industrial
Cathay Pacific, Chinese Airlines Cut Fuel Surcharges
Cathay Pacific this week announced a 44% cut in fuel charges, bringing such charges down to HKD 61 for short-haul flights and HKD 280 for long-haul ones. Major Chinese airlines have also cut their fuel surcharges by an average of 70% in recent weeks.

Lun Lu, Iris Tan, and Peter Liu contributed to this article.