Furthermore, October fiscal revenue showed negative growth. Figures from the Ministry of Finance showed that China's fiscal revenue dropped 0.3 percentage points in October year on year, while the central fiscal revenue fell a whopping 8.4 percent. By the end of the month, the broad and narrow money supplies had continued to fall, squeezing banks' liquidity and the markets at large. The production activities of enterprises fell off, signaling a further economic slowdown. In October, the amount of generated electricity also dropped, falling 0.46 percentage points from the same period a year ago. This was its first negative growth since February 2005.

The economic slowdown has taken a toll on small and medium-sized enterprises (SMEs). The National Development and Reform Commission said 67,000 SMEs collapsed in the first half of this year. Analysts expect more SME bankruptcies in the second half of this year.

Stimulus package

Against the backdrop of a possible economic downturn, the Central Government's top decision makers went to different provinces to investigate local economic conditions. From July to November, they covered major national economic powerhouses such as Shandong, Jiangsu, Shanghai, Zhejiang, Fujian and Guangdong. Based on their conclusions, they developed a series of policies to stimulate economic growth.

On November 5, Premier Wen Jiabao chaired a State Council conference, which proposed 10 measures to propel economic growth and expand domestic consumption. The conference also changed the country's monetary policy from a stringent one into an appropriately accommodating one and required financial institutions to issue loans to enterprises in need.

Decision makers at the November 5 conference changed the country's prudent fiscal policy into a more active one that promised more fiscal support-of up to 4 trillion yuan ($586 billion)-for infrastructure construction, civil engineering projects, ecological preservation and post-earthquake construction. They also vowed to increase rural and urban incomes, especially for those with low incomes.

In line with the Central Government's proposal to boost economic development, the central bank issued a report saying that its new priority was to fight deflation instead of inflation. On November 27, the central bank slashed the benchmark deposit and loan rates by 1.08 percentage points, the boldest move in a decade.

On the same day, the central bank also decided to reduce the reserve requirement ratio. As of December 5, large depository financial institutions, including the Industrial and Commercial Bank of China Co. Ltd., Agricultural Bank of China, Bank of China Co. Ltd., China Construction Bank Corp., Bank of Communications Co. Ltd., and Postal Savings Bank of China, have been allowed to reduce the reserve requirement ratio by 1 percentage point, while smaller depository financial institutions can reduce it by 2 percentage points.

On December 3, Premier Wen Jiabao chaired another State Council meeting and proposed nine measures to boost the country's financial development. The measures included increasing loans, expanding the construction of affordable homes, boosting auto sales and encouraging banks to issue more loans to businesses in rural areas.

The country's top decision makers have recognized the tighter economic situation China faces and showed their concerns. At a study meeting chaired by Chinese President Hu Jintao on November 29, Hu said the current external environment was becoming more complicated as the financial crisis deepened and expanded.

Hu said in the period ahead, China would be challenged by the worsening global financial crisis and that an international economic slowdown with less external demand for the country's products would weaken its competitive advantages. China also would face the pressure of intensified international competition and rising trade and investment protectionism in international markets. Hu repeated that under the current conditions China must be totally focused on economic development and take powerful measures to ensure good and fast economic and social development.