CHINA is close to recession and has begun easing credit selectively and cautiously, W.I. Carr says. Group economist Joe Zhang said several banks in China had begun relaxing their tight money policy for 'profitable and priority' businesses, and would continue to do so until at least the middle of next year. 'China's economic slowdown so far has been more severe than official statistics suggest,' Mr Zhang said. 'In fact, the economy is close to, if not already in, recession, despite official statistics showing [gross domestic product] growth in the first nine months of this year of 9.8 per cent in real terms.' He said company data in China did not substantiate the government's stated economic growth rate. Average profit growth for mainland listed companies was near zero for the first 10 months, and losses of state enterprises were up 18.8 per cent through September. Adding a GDP deflator of about 12 per cent, which removes the effects of changes in the general level of prices, to the 9.8 per cent real GDP growth would result in a nominal growth of about 22 per cent for the first nine months. Mr Zhang estimated that China's true GDP growth from January to September was about 4 per cent. Signs of a selective credit easing were already apparent, Mr Zhang said, with mainland bankers dipping into unused lending quotas granted by the central bank for this year. The growth rate of industrial output rose to 12.9 per cent last month from 11.4 per cent in September, and black-market interest rates were declining.