In recent years China has contributed around a quarter of global GDP growth. Until a few months ago, the fruits of that were evident across the board: raging commodity prices, for example, or mushrooming European designer stores in Shanghai. Now the momentum is ebbing. Prices of steel, a key material in the industrialisation of modern China, are crumpling as Chinese construction pauses. Auto sales, which surged by a quarter in 2007, are expected to be flat next year according to some forecasts.
Worse is to come. Seasonally adjusted month-on-month data from September shows falling exports in a number of categories, including the dominant mechanical and electrical products. Nervous householders continue to squirrel more money away in the banks. And it is hard to be too reassured by last month's re-acceleration in loan growth, particularly since much of this went to households, implying a step-up in mortgages just as property prices start to wilt.
The good news is that Beijing has the cash to throw at a slowing economy. There is little to stop it cutting taxes and pumping up spending. At the same time, monetary policy is switching to “flexible”, which has meant two interest rate cuts in the past month or so and more credit freed up by reducing banks' reserve requirements. Restrictions on real estate investment may also well be relaxed.