Will The Great Wall Withstand The Economic Storm?

China warned its economic downturn was deepening with the spread of the global financial crisis, raising the possibility of job losses and social unrest in the world’s most populous nation.

The warnings from the country’s top planner came shortly after China’s central bank slashed interest rates by the biggest margin in 11 years to protect its economy from the worst global downturn in decades.

China’s economy has been hit by a sharp drop in demand for its exports, due to a severe economic slowdown ignited by the U.S. financial crisis. This quarter is expected to be its worst in three years.

The State Information Centre, a government think-tank, forecast annual growth would slow to 8% this quarter from 9% in the third quarter, still a respectable figure but a far cry from blistering double-digit growth rates recorded in the past five years.

With factories closing by the thousands, slowing growth may undermine the stability that the ruling Chinese Government craves for its 1.3 billion people. Excessive bankruptcies and production cuts may lead to massive unemployment and social unrest.

A severe slowdown in China's economy will further dampen the hopes of Asian economies' battle against the severity of recession.