THIS WEEK'S INTEREST rate cuts show how badly China is suffering from the global recession, the impact of the September 11 attacks, the slowdown in the US market and, most important, weak domestic demand. Deputy head of economic forecasting division at the State Information Centre Xu Longyuan said: 'China is facing the pressure of deflation and its macroeconomy is running the risk of recession.' China's gross domestic product growth slowed in each quarter of last year, from 8.1 per cent in the first quarter, to 7.8 per cent, 7 per cent and finally 6.5 per cent in the last quarter. One major reason for this was the recession from the third quarter in the US, one of its two largest export markets, which was compounded by the September 11 attacks and their aftermath. Trade with the US last year grew by 8.1 per cent, down sharply from 21.2 per cent a year earlier. Following the attacks, the central banks of the US, Europe and Hong Kong all cut rates. Another factor in the central bank's decision was the dismal performance of the stock markets, which have fallen by more than 30 per cent since June last year. The cut is an attempt to persuade people that they can get a better return from shares than by leaving money in the bank. 'We are still the world's best performing economy. But all the evidence shows that we are running out of steam. Cutting interest rates is like stopping at the petrol station,' the China Business Times reported in a front-page commentary. Professor at the China Economic Research Centre of Beijing University Song Guoqing said the cuts would encourage consumption, especially by the rich, in boosting the stock market and cutting costs for companies. Prof Song said: 'We cannot say that China's economy is in recession. But growth is slowing down and investment is weak. 'After the rate cut, I do not anticipate any more government measures for the time being. We will have to wait and see. If they cut rates again, I think the impact will be limited.' For the central bank, most alarming is the refusal of individuals to spend, despite rates that are already close to historic lows, increasing availability of consumer credit for big-ticket items such as cars and homes and prices that are extremely stable. The bank on Wednesday published figures showing that at the end of last month individual bank deposits had reached a record 7.5 trillion yuan (about HK$7.02 trillion), an increase of 12.6 per cent over a year earlier, compared with a year-on-year rise of 10.5 per cent last January. The 19 biggest department stores in Beijing reported sales during the seven days of the Lunar New Year holiday, from February 12 to 18, were 268 million yuan, a fall of 24 per cent compared with the holiday period a year ago. City dwellers say they save, rather than spend, because of future uncertainty, knowing they will have to fund their own pensions, medical care, housing and education for their children - costs that were borne, entirely or mostly, by the state in the pre-Deng Xiaopeng era. China is moving to commercialise these services to reduce the state's obligations to its citizens, transferring the financial burden to them from the state and state companies and institutions. Least sanguine about the cuts was the Economic Information Daily, which said in a front-page commentary that the cuts would not be enough to kick-start the economy on their own. The newspaper said: 'If you want people to buy big-ticket items like cars and homes, there is so much more that needs to be done in terms of price, service and availability of finance. 'And we must greatly improve the social welfare system before people will dare to spend money. 'Cuts alone will not be enough to stimulate the stock market. There is much else that needs to be done. Good companies are not short of money - what they need is good projects. 'But many sectors are closed and projects with high rates of return [are] not available. 'If we do not open up these sectors, a cut in interest rates will do little.'