China’s Economy Is Rebounding
First Published: September 17, 2009 ADawnJournal.com
While much of the rest of the world has been dealing with a financial crisis that has seen economies contracting, China’s experience of the global downturn has been a different kettle of fish. They have not been immune to the overriding pessimism that has gripped most nations, but their economy has continued to grow – just a lot slower than before. Chinese Prime Minister, Wen Jinbao, has stated openly that he wishes to drive a recovery from this slow expansion by continuing a level of government spending which has been described as “unprecedented”. Speaking to the World Economic Forum meeting in the north-eastern Chinese city of Dalian, Wen said that he would not change his government’s financial policy when the conditions did not justify such action.
Though paying heed to the undeniable fact that China’s economy is rebounding, like many of the major global markets, Wen admitted that the rebound was currently “unstable, unbalanced and not yet solid”, and continued a global commitment to maintain government action to ensure a steady and long-term recovery from the deepest global recession since the Second World War. While the level of government loans is expected to taper off in order to ensure that any growth is “genuine” – a good analogy here would be the effort to ensure that a patient with a broken leg can eventually walk without crutches – investment will not fall away completely, rather it will remain at enough of a level to give the patient breathing space to recover properly.
Key economists such as Wang Qing, chief Asia economist for the Morgan Stanley bank in Hong Kong, feel that although the worst of the recession has undoubtedly passed, a hang-up in Chinese exports may muddy the waters when it comes to driving an overall recovery. Over the past nine months the country’s exports have fallen as struggling economies showed a reluctance to look overseas when they had problems of their own to correct. This has had the knock-on effect in China of creating an overcapacity in their marketing sector and resultant unemployment – meaning that the record government stimulus package of 4 trillion yuan (More than US$586 billion) has not had as pronounced an effect as might have been hoped.
One of the key indicators of Chinese market performance, the Shanghai Composite Index, has shown a recent slide of 20%, reflecting wider concerns that continued government lending could in fact have a negative effect on Chinese economic growth. The initial results from the government’s stimulus lending have been positive, arresting that slide and creating growth. Wen has judged from this that the government’s liberal and proactive economic steps are the way forward for the moment, but that the time had come when some stimulus measures had to be left to do their work, some having almost completed that process and others likely to take some time to become fully effective. With the global economic sector awaiting the publication of August’s figures, a look at China’s results in the next few days will make for instructive reading.