Recession bites China hard and fast

China's exports dropped at a breathtaking rate last month. They were down by almost 26 percent to $65 billion compared with February of last year.

According toThe Wall Street Journal, "The median forecast by six economists surveyed by Dow Jones Newswires was for a 6.7 percent drop in exports."

Even though China is beginning to release its $585 billion of stimulus capital into the market, the waves from the drop in exports should spread to almost every part of the country. With exports falling so quickly, a number of factories will have to close or cut production.

This means that more of China's middle class, people who moved from rural areas to work in the cities, will be out of work. In turn, these workers will no longer be consumers and the demand for goods that China has been able to sell within its own borders will drop.

The other substantial effect should show up in China's GDP within a quarter or two. The world's most populous country relies so heavily on exports that it cannot keep the pace of an 8 or 9 percent growth rate for its economy if its trade partners shut down their demand.

There has always been the risk that a recession in the West and Japan would spread to China as consumer confidence and activity in those regions fell. It is no longer a risk. It has become a reality.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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