A leading advisor to China's central bank has dashed hopes of an early economic recovery saying its economy has yet to bottom.
Fan Gang, a member of the bank's monetary policy advisory committee is quoted in official Chinese media as telling a weekend forum that it will take at least two or tree years for China's economy to recover.
The warning came as Australia's Treasurer Wayne Swan described China’s growth prospects as "absolutely critical to Australia’s exports and commodity prices".
Mr Swan returns to Canberra from Brisbane today to work on the second Rudd Budget to be delivered in four weeks on May 12...
"It comes as the global economy is facing its worst conditions in 75 years," the Treasurer said yesterday. "But we are determined to deliver a responsible Budget that gets the balance right between supporting growth and jobs now and putting in place the building blocks we need to prosper after the global recession ends."
Fan Gang said the major economies were still in the early stage of recessions which would weigh on China's exports for years to come. China was running down inventories and scaling back manufacturing capacity. The process would take at least another 2 years.
The comments are are odds with a more optimistic assessment delivered by China's Premier Wen Jiabao who pointed to an increase in new loans to a record high and a jump in industrial output in March of 8.3 per cent.
They come ahead of critical economic growth figures for the March quarter due later this week.
Australia's biggest customer Japan reported Monday that its wholesale prices were plunging at their fastest rate since 2002, pushing it into its second bout of deflation this decade.
Japan's wholesale prices fell 2.2 per cent over the year March, a deeper fall than the 1.6 per cent recorded in in the year to February.
Analysts say it is inevitable that consumer prices will turn down as well encouraging Japanese consumers to further put off spending, deepening Japan's downturn.
In contrast to its last domestic downturn, its export industries will be ailing at the same time, providing no relief for Australian resource exporters.