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Global Recovery Fear As China Growth Cools

(c) Sky News 2012

China has announced its slowest growth rate for three years, amid concerns of its impact on the global economy.

Figures released in Beijing show GDP for the second quarter of the year at 7.6% - that is a drop on the previous quarter which was 8.1%. The quarter before that was 8.9%.

The country, which is the workshop of the world, has enjoyed a growth rate of around 10% for decades. But even China is taking a hit from the European crisis.

China's Premier Wen Jiabau had braced China for a drop in GDP. He said the economy faced 'pressure'.

The government had already announced two interest rate cuts in June and has introduced other stimulus measures and efforts to loosen credit controls and stimulate growth.

The energy sector in China is often seen as a barometer of the nation's economy - and here it reflects China's slow-down. In the first six month of 2012, China's biggest electricity company said production was down 1.5%. Coal and steel prices are down too.

Overall there has been a dip in revenue from construction - the government is trying to stimulate the economy by making it easier to invest in building projects.

Even so, China has various notable 'ghost' buildings or construction projects - compared to its image of just a few years ago.

China is attempting to build Asia's biggest theme park in Chenzhuang village on the outskirts of Beijing - but construction has already been halted twice.

Businesses are taking fewer loans and land sales have dried up thanks to central government initiatives to cool the over-heating property market. There is also a shortage of cash and confidence among potential buyers. House prices are down 1.9% from last year.

The $586bn (£380bn) stimulus package that enabled China to sail through the 2009 global downturn only deferred the pain for many. Local governments are being asked to repay their debts and that means some serious belt-tightening.

But still, China is the world's largest exporter and the second biggest importer of goods. Its (Euronext: ALITS.NX - news) economy is still accelerating at breakneck speed compared to most of the rest of the world.

Compare China's current growth rate of 7.6% to the doldrums of the European economies - Britain's GDP is in negative growth.

China's economic health is of huge importance to the world.  And China's GDP dipping below the number eight is seen by many here as auspicious.

Eight is considered a lucky number in China with its visual perfect symmetry. The Chinese word for eight rhymes with the Chinese word for rich.

People spend a fortune trying to buy properties with the number eight in the address - or get a car with an eight in the number plate.

Beyond that, in the real world, the government of one-party state China never wants to court economic dissatisfaction.

Senior (Xetra: 852271 - news) government officials have warned for decades that economic slowdown could spell social unrest and China's modern growth rate over the past three decades has been impressive enough to keep most people happy most of the time.

Now thousands if not millions of migrant workers will find their jobs under threat. Migrant workers have always supplied the elbow grease that enables the China factory to function.

:: The Hang Seng and Nikkei 225 (Osaka: ^N225 - news) were up slightly in Friday trading after news was released.