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China’s economic slowdown, already the deepest in seven years, is set to worsen as the global recession pummels its exports, darkening the outlook for suppliers from Australia to Taiwan.

Gross domestic product will grow 6.3 percent this quarter from a year earlier, according to the median estimate of nine economists surveyed by Bloomberg News. The survey was conducted after yesterday’s report that the economy expanded 6.8 percent in the fourth quarter.

Recessions in the U.S., Europe and Japan have slashed demand for China’s electronics and textiles, forcing the closure of thousands of factories and throwing millions out of work. The slowdown is increasing pressure on policy makers to add to a 4 trillion yuan ($585 billion) stimulus package and cut interest rates to revive an economy that accounts for about a fifth of global growth.

“China’s economy is likely to slow further,” said Mark Williams, an economist at Capital Economics Ltd. in London who worked at the U.K. Treasury as an adviser on China from 2005 to 2007. “A strong recovery will depend on more aggressive action by the government, in particular to beef up its own contribution to the stimulus.”

China is also facing pressure from U.S. President Barack Obama to allow the yuan to strengthen. Timothy Geithner, Obama’s pick for Treasury secretary, said the president “believes that China is manipulating its currency.” The remarks, in response to questions from the Senate Finance Committee released yesterday, may presage a tougher line with China. Former Treasury Secretary Henry Paulson refrained from calling the country an illegal “manipulator.”

Miners Suffer

Companies from Australia’s BHP Billiton Ltd., the world’s largest mining company, to Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, face declining earnings as China’s demand plunges.

BHP is closing a nickel mine and cutting 6,000 jobs around the globe because of weaker demand, largely caused by the slowdown in China, the world’s No. 1 consumer of metals.

“The Chinese boom that has supercharged the Australian economy over the past five to seven years is receding rapidly,” Australian Finance Minister Lindsay Tanner said yesterday. “That’s a big problem for Australia. It is part of a wider picture that is coming to bear throughout the world.”

Japan and South Korea posted record declines in exports to China last month, worsening the effect of plunging demand from the U.S. and Europe. China’s own exports declined by the most since 1999, triggering factory closures and job cuts.

‘Caught a Cold’

“China coughed and Korea caught a cold,” Oh Suk Tae, an economist at Citigroup Inc. in Seoul, said after the nation yesterday posted its biggest economic contraction since the Asian financial crisis. “We’re now going down because of China. It’s not our savior any more.”

South Korea’s economy shrank 5.6 percent last quarter, more than twice the expected pace. China is South Korea’s biggest export market pay day loans.

China’s economic slide will also trim its contribution to global growth, estimated at 19.5 percent by the International Monetary Fund in 2007, more than any other nation.

China’s economy grew 9 percent in 2008 after a 13 percent expansion in 2007 that pushed it past Germany to become the world’s third-biggest.

At home, rising unemployment and a widening gap between urban and rural incomes are political challenges for the ruling Communist Party, which has pledged more efforts to maintain social stability.

Urban Jobless

The official urban unemployment rate, which doesn’t include millions of migrant workers, jumped in the fourth quarter for the first time since 2003. A rate as high as the government’s 4.6 percent target for the year would be the worst since 1980.

“Could the economic situation become so bad in China that it threatens the regime itself?” Albert Edwards, a London-based global strategist for Societe Generale SA asked this month. “Of course it could, and clients should consider the implications of such an event.”

Edwards predicted the 1990s Asian financial crisis and in March 2007 said a U.S. recession would spur a bear market in equities.

Premier Wen Jiabao said this week that the government must work urgently this quarter to reverse the slowdown and maintain social stability amid a “very grim” outlook for jobs.

Weaker growth has hurt profits at companies from China Southern Airlines Co. to Aluminum Corp. of China, and a property market and construction slump will make it harder to revive the economy. China Vanke Co., the country’s largest publicly traded real-estate developer, said sales fell 14 percent in December from a year earlier.

‘Looks Fragile’

“Key demand drivers, including exports and domestic consumption, as well as profit growth, are now slowing, and they will continue to grind lower over the year,” said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai. “Real estate still looks fragile, as does private investor sentiment.”

As well as the stimulus package, China has pressured state- owned banks to increase lending, reduced export taxes, stalled the yuan’s gains against the dollar to help exporters, and is adding support for 10 key industries, including tax cuts and subsidies for steel and autos.

China’s leaders “will do anything” to maintain an economic expansion of about 8 percent, the government’s target for creating jobs and maintaining stability, according to Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.

“This is not an economy that’s going to bounce back quickly,” said Ben Simpfendorfer, an economist at Royal Bank of Scotland Plc in Hong Kong.

He forecasts exports will slump 15 percent in the first half, dragging economic growth down to 5 percent this year.

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