By Keith Weir
LONDON (Reuters) - China pledged fresh measures to revitalize its economy on Wednesday after exports tumbled and domestic demand shrank, with bleak figures from Europe showing how badly its major economies were faring.
Industrial output sank in several European economies in October, as economic torpor forced the car industry and other hard-hit sectors to cut production.
Global miner Rio Tinto said it was cutting 14,000 jobs -- joining a growing list of companies shedding workers in response to a sharp downturn.
Sweden's SKF, the world's biggest bearings maker, is axing 2,500 jobs because of declining demand. Japanese electronics giant Sony Corp said on Tuesday it would eliminate 16,000 jobs.
Responding to slower growth, China's top leadership pledged to ramp up public spending and cut taxes to promote domestic demand in the world's fourth-largest economy.
"The general requirements for next year's economic work are maintaining stable but rapid economic growth by boosting domestic demand," state radio reported at the conclusion of a three-day meeting of the Central Economic Work Conference.
The impact of the global downturn on China were illustrated by shock trade figures.
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.
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.
Chinese state media have said the authorities would do all they could to "protect eight" -- a reference to the 8 percent growth rate widely thought to be necessary to create enough jobs for the millions of people entering the work force every year.
"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
Industry output fell in France, Italy, Sweden and Greece in October.
Analysts said November and December would be even worse and several said they would be scaling back their already-negative outlooks for fourth quarter gross domestic product.
"Industrial output in the euro zone has fallen into a very deep recession, suggesting that GDP in Q4 could contract even more sharply in Italy, France and Germany than is currently assumed," said Holger Schmieding, a Bank of America economist.
The U.S. economy is likely to shrink 1.1 percent next year as job losses mount, a survey said.
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.
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 were flat.
SUB-ZERO CHILL
Investors fearful of deflation and riskier assets had 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.
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 on Wednesday 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)
