By Tony Munroe and Keith Weir
HONG KONG/LONDON (Reuters) - A dramatic fall in Chinese exports underlined the weakness of the global economy on Wednesday and miner Rio Tinto joined a growing list of companies cutting jobs in response to the sharp downturn.
Exports from China shrunk 2.2 percent year-on-year in November, the largest drop since 1999. Imports tumbled almost 18 percent, the biggest fall on record, showing its economy is also being squeezed by weakening domestic demand.
Rio Tinto said it was shedding 13 percent of its workforce and would cut capital expenditure by $4 billion in 2009.
The company said it acted in response to "the unprecedented rapidity and severity of the global economic downturn."
Jobs are evaporating around the globe as the fallout from the credit crisis pushes much of the developed world toward recession.
Sweden's SKF, the world's biggest bearings maker, said it would cut 2,500 jobs because of declining demand.
Further evidence of China's cooling economy came from figures showing factory gate inflation collapsed in November to 2 percent, prompting fears deflation may lie ahead.
The World Bank predicted China's economy would grow 7.5 percent next year -- far below the expected 9.4 percent for the current year and the 11.9 percent clocked in 2007.
"Global demand for Chinese products is vanishing," said Gene Ma, an economist at China Economic Monitor, a Beijing consultancy. "Secondly, the credit freeze in importing countries has made it hard for Chinese exporters to sell abroad."
U.S. CAR PLAN
Data from Asia and Europe was uniformly bleak, suggesting recession could be protracted and painful.
Japanese companies slashed machinery investment in October in another ominous sign for the world's second-largest economy.
French industrial output plummeted in October, dragged down by the largest fall in auto production since August 1999.
Some solace came from progress in talks to bail out the ailing U.S. auto industry.
The House of Representatives could vote as early as Wednesday on a $15 billion plan to bail out and restructure U.S. automakers but the initiative may face possible roadblocks in the Senate, officials said.
The White House and congressional Democrats sought to quickly finalize an agreement in principle struck Tuesday night on conditions for providing low interest loans to avert a threatened industry collapse if one or more of the Detroit Three automakers were to fail.
"Bipartisan hard work has paid off," said Democratic Sen. Carl Levin of Michigan whose home state headquarters General Motors Corp Ford Motor Co and Chrysler LLC.
Asian stocks rallied more than 3 percent to a one-month high on Wednesday on hopes governments worldwide will help out ailing industries and implement stimulus measures as they fight back against a deepening economic crisis.
However, European shares dipped.
SUB-ZERO CHILL
Investors fearful of deflation and riskier assets scrambled to hand over cash to the U.S. Treasury in return for no interest at an auction on Tuesday, while interest rates on some Treasury bills rates fell below zero in the market.
When rates turn negative it shows investors are so concerned about the safety of assets that they are willing to effectively pay the U.S. government a fee to hold their cash.
"There's still a ton of fear. People are now paying the government to take their money. Something is wrong," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
With limited scope for further interest rate cuts from the present levels of 1 percent, economists are expecting the U.S. Federal Reserve to look at new ways to boost the supply and circulation of money to avoid a deflationary slump.
The Wall Street Journal reported that the Fed is considering issuing its own debt for the first time.
Fed officials have approached Congress about the move, which could include issuing bills or some other form of debt and would provide the central bank with more flexibility to tackle the financial crisis, the Journal said.
(Editing by Mike Peacock)
