:00:04. > :00:14.latest headlines from BBC World news this morning. Time for World
:00:14. > :00:17.
:00:17. > :00:23.A warm welcome, you are with World Business Report. Here are the
:00:23. > :00:26.headlines: Brace for strike - Portugal's largest union vows to
:00:27. > :00:31.bring the country took a downturn in protest against austerity
:00:31. > :00:41.measures. Preparing for a slowdown - outputs
:00:41. > :00:45.
:00:45. > :00:50.in Chinese factories slows for a Portugal it is bracing itself for a
:00:50. > :00:55.general strike, the second since it negotiated a 78 billion euros bail-
:00:55. > :00:59.out last April. The protest is against sweeping austerity measures
:00:59. > :01:03.imposed in return for the financial aid. The industrial action is
:01:03. > :01:06.already affecting transport in the country. At the heart of the debate
:01:06. > :01:11.is the drive towards flexible and less generous employment terms
:01:11. > :01:18.which have come as a shock to almost 500,000 people in state jobs.
:01:18. > :01:26.Our correspondent has more. This is the working life many fear
:01:26. > :01:33.could be theirs if they do not try and defend what they have. This man
:01:33. > :01:37.works casual cafe shifts. Last month he took over 250 euros,
:01:37. > :01:43.leaving on a Jaguar is to live on after rent. His dream is to finish
:01:43. > :01:47.his studies, but the cafe it is closing due to lack of business. He
:01:47. > :01:53.is now looking for fruit-picking jobs overseas. I have sent e-mails
:01:53. > :02:00.to Denmark and other countries because they pay very well. My goal
:02:00. > :02:04.right now is to be able to survive. I am not exactly living, I am
:02:04. > :02:10.surviving. Meanwhile a response to the strike may show the degree to
:02:10. > :02:13.which ordinary Portuguese will accept these new realities. The
:02:13. > :02:19.largest union he can manage a show of strength, but it does not enjoy
:02:19. > :02:25.a wholesale support. By the unions have grudgingly accepted the need
:02:25. > :02:28.for things like a loss of holiday bonuses and more work flexibility.
:02:28. > :02:33.Two-thirds of voters had chosen parties that support the austerity
:02:33. > :02:41.measures. The politicians he exploited feelings of disillusion
:02:41. > :02:51.and despair. -- few politicians here. It is the next few months
:02:51. > :02:52.
:02:52. > :02:55.The strike in Portugal comes as fears grow that it will need
:02:55. > :03:00.another financial bail-out. The government has firmly denied that.
:03:00. > :03:10.The economy is expected to contract by 3.3% this year. Unemployment
:03:10. > :03:10.
:03:10. > :03:14.reaches record levels. We must be to an Economist. What is your
:03:14. > :03:21.outlook for Portugal? The jury is out, isn't it as to whether it will
:03:21. > :03:25.need another bail-out or not? the previous bail out, it was
:03:25. > :03:29.foreseen that Portugal would return to financial markets in 2013 and
:03:29. > :03:36.would be able to finance itself. If you look at what interest rates are
:03:36. > :03:39.doing right now. They are much higher than what they were four or
:03:39. > :03:46.Italy, Ireland or Spain. Financial markets are not convinced that
:03:46. > :03:50.Portugal will actually make it. It has a high public debt to GDP, its
:03:50. > :03:54.private sector is extremely high as well and there is an inflexible
:03:54. > :04:00.economy that needs to be reformed. The government is trying to tackle
:04:00. > :04:07.all three at the same time. Having said that, it is tackling it and
:04:07. > :04:09.many on the outside, including those who represent the union, said
:04:10. > :04:14.they are doing the best possible job they can to meet austerity
:04:14. > :04:17.measures. It seems that even though they are doing the best they can,
:04:17. > :04:26.it is very difficult with the Portuguese economy as it is for it
:04:26. > :04:36.to move on. That is absolutely right. First of all, Portugal is an
:04:36. > :04:39.extremely closed economy, C cannot rely on exports to help. If you
:04:39. > :04:44.look at the example of Sweden at the beginning of the 1990s, they
:04:44. > :04:47.also had a lot of public debt as well as private debt. First they
:04:47. > :04:51.reduced private debt through structural reforms. Then in the
:04:51. > :04:56.second phase they started to reduce the public debt. Portugal is trying
:04:56. > :05:00.to do everything at the same time, making it difficult. If you look at
:05:00. > :05:04.average GDP growth for world economy since 2002, Portugal is
:05:04. > :05:08.among the bottom three in the growth league worldwide. It does
:05:08. > :05:11.need to do something about its economic growth and it does need to
:05:11. > :05:14.carry out structural reforms. The only question is when we will
:05:14. > :05:22.actually see the results of these reforms? That is crucial to
:05:22. > :05:26.Portugal. In the next few months, as our correspondent said, we need
:05:26. > :05:30.to watch Portugal closely to see whether it will be heading for a
:05:30. > :05:37.second bail-out or whether it will manage to avoid that and be in a
:05:37. > :05:45.place where it can come back to the markets in 2013? Coming back to the
:05:45. > :05:49.markets in 2030 might be his dream eight difficult. -- 2013. I do not
:05:49. > :05:53.think that Portugal will go the same way as Greece. His political
:05:53. > :06:03.institutions are much more stable. Coming to the markets again might
:06:03. > :06:09.
:06:09. > :06:14.A survey measuring manufacturing activity in China is showing output
:06:14. > :06:20.shrinking for a fifth month in a row. The HSBC purchasing managers'
:06:20. > :06:26.index fell to 48.1. Any number below 50 indicates contraction. It
:06:26. > :06:31.is based UN data compiled from monthly replies to questionnaires
:06:31. > :06:37.to purchasing executives. The official figures will be released
:06:37. > :06:44.next week. We go live to Beijing to speak to an associate professor
:06:44. > :06:48.from a university's School of Economics. Give us your take on
:06:48. > :06:55.this latest news about what factories are doing it in China.
:06:55. > :06:59.The fact that they are still seeing a contraction. China's economy is
:06:59. > :07:04.in a slowdown. It has been in a slowdown since at least November.
:07:04. > :07:08.What these numbers are telling us is that it is across the board. A
:07:08. > :07:12.lot of people outside of China are focused on the negative impact of
:07:12. > :07:16.the eurozone crisis, declining demand from Europe and sluggish
:07:16. > :07:20.demand from the US on its exports from China. The numbers are telling
:07:21. > :07:29.us that it is part of the picture. Another part of the picture is a
:07:29. > :07:39.slowdown taking place within China, driven by domestic issues such as
:07:39. > :07:43.the severe downturn in property. There is also a lot of concern
:07:43. > :07:47.about mounting bad debt in the system and the impact that has on
:07:47. > :07:53.the ability to finance further growth. What would be of Verity's
:07:53. > :07:59.do about this. The Premier race at the promised economic fine-tuning
:07:59. > :08:02.to get China on a more sustainable growth path. Fine-tuning is the key
:08:02. > :08:09.word. I do not think that we will see what a lot of people on the
:08:09. > :08:13.market were to see, which is a big stimulus. One of the reasons is
:08:13. > :08:20.because one of the numbers in the index suggested that prices were
:08:20. > :08:23.not dropping, that inflation may not be raging, but it is persistent.
:08:23. > :08:27.Chinese authorities have to be concerned that if they pour money
:08:27. > :08:32.into the economy, they could see a spike in inflation. The other thing
:08:32. > :08:37.is do you really want to pour money into the economy to fund more empty
:08:37. > :08:42.buildings, more infrastructure projects that do not pay back, more
:08:42. > :08:48.overcapacity in steel and other industries? Not necessarily. Even
:08:48. > :08:53.though the markets might want to see that kind of growth, somebody
:08:53. > :08:57.taking a longer term perspective on the economy might see the downturn
:08:57. > :09:02.has a good thing. If it represents a real economic adjustment and not
:09:02. > :09:08.just more of the same. We'll leave it there, thank you for giving your
:09:08. > :09:12.take on what is happening in China. A lot of stories and economic news
:09:12. > :09:15.impacting the markets today. Normally when we hear news of
:09:15. > :09:23.contraction in China the markets get very spit about that. As you
:09:23. > :09:28.can see, they are fairly flat. South Korea is the only one slowing
:09:28. > :09:38.slightly. We did not see a huge reaction to that story, which is
:09:38. > :09:38.
:09:38. > :09:42.quite interesting. The dollar-yen always has an impact on the trade