China Growth Slows, S.Korea Bailout Lifts Won

South Korea's $130 billion financial bailout gave its embattled currency a lift on Monday but did not dispel wider concerns about a global economic downturn as China reported single-digit growth for the first time in four years and Dutch bank ING sought government funds.

China's gross domestic product rose much more slowly than expected in the third quarter, raising uncertainties about the world's main source of economic growth. 

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Stocks in Asia moved higher as investors sought bargains after the sharp sell-down of recent weeks, but markets remain largely unconvinced that $3.3 trillion in government pledges globally is enough to resolve the worst financial crisis in decades.

Bank of Japan Governor Masaaki Shirakawa said that the growth in the world's second-biggest economy is highly likely to remain sluggish as countries elsewhere stutter.

"Tensions are heightening in global financial markets and downside risks exist for the world economy," he said in a speech.

China reported that its economy -- the world's fourth-biggest -- grew 9 percent in the third quarter from a year earlier, well below forecasts of 9.7 percent.

That compared with 10.1 percent in the second quarter, and marked the first time expansion had slipped into single digits in at least four years. Industrial output dropped to a six-year low.

"It's very obvious now that economic growth is slowing quickly, although some indicators such as exports are holding up due to lagging effects," said Zhang Fan, analyst with Tebon Securities in Shanghai.

The cabinet of German Chancellor Angela Merkel is expected to approve later on Monday a 500 billion euro ($674 billion) rescue package that sets strict conditions on participating banks, including limits on managers' salaries, bonuses and severance, a draft seen by Reuters shows.

The German plan was approved by lawmakers on Friday, but conditions for participating banks, was still being discussed early on Monday.

Seoul To The Rescue

South Korea's won, which had slumped 11 percent in October alone, jumped 8 percent in early trade on Monday after authorities announced they would inject $30 billion into banks and exporters and provide guarantees worth $100 billion on foreign debt.

But the currency gave back some of the gains as the stock market came off early highs.

South Korea's central bank vowed on Monday to shield Asia's fourth-biggest economy from the global financial turmoil, saying it would provide liquidity where needed.

The central bank governor said economic growth will probably slow next year, but would not contract this year.

"I don't think such a situation will take place," Bank of Korea Governor Lee Seong-tae told lawmakers when asked if Asia's fourth-largest economy will post its first annual decline since the Asian financial crisis a decade ago.

He also said his bank would take into account slowing economic growth and continued current-account deficits when managing its future interest rate policy, but declined to say whether the central bank would further cut interest rates as many investors expect.

"We expect the package to go a long way toward stabilising the jittery financial markets in Korea," Goldman Sachs economists wrote in a note on Monday.

"The decisive move of the government will likely dispel lingering concerns of investors about the usability of the foreign reserves, relieve much of the pressure in the currency markets, and help support bank stock prices, which dropped the most in the region last week," they said.

Whatever It Takes

The Dutch government agreed to pump some 10 billion euros into ING after shares in the country's largest listed bank slumped by a quarter in the latest trading session.

ING said it will sell its Taiwan life insurance business to Fubon Financial for $600 million as it scrambles to raise cash.

Governments have pledged about $3.3 trillion -- about equal to the economic output of Germany -- to guarantee bank deposits and bank-to-bank lending, and in some cases have taken stakes in banks that are awash in bad assets.

The head of the European Central Bank pledged on Sunday to do whatever it takes to restore confidence to rocky markets, as governments world-wide pour cash into banks and markets hit by the financial storm that has toppled banks in the United States and Europe.

Efforts to break open a liquidity lock-down between banks appeared to be paying off in the form of tighter credit spreads.

ECB Governing Council members Erkki Liikanen of Finland George Provopoulos of Greece said rates would fall as trust increases between banks following the measures taken by central banks and governments.

Top White House economic adviser Edward Lazear told the media the first stages of that process are under way. "The numbers are going in the right direction," he said.

Still, he said, "parts" of the United States seem to be in recession based on jobless rates much higher than the national average.

Spain became the latest country to say it would fall into recession in 2009 if the global economy suffered that fate.

In the Middle East, a newspaper said the United Arab Emirates would inject $19.06 billion (70 billion dirhams) into long-term bank deposits, and Oman's Chamber of Commerce and Industry called for a cash injection into banks for financing.

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