The current global recession has brought about the hottest debate of the season: the fate of China in the world economy. The debate options are on either extreme, whether China will emerge as the global recession’s worst victim or its most successful survivor.
If we are to go by economic reports, current analyses say that China is slowly emerging from the recession, not because of its reportedly protectionist policy but because it has remained a trading partner of countries that are dependent on the import-export mode of economy. So, there is apparently no truth to the speculation that an American recession would trigger a Chinese depression.
‘Long dependent on exports to America, China continues to grow strongly despite a collapse of exports, down 26.4 percent in May alone. The reason is growth at home, with retail sales up 15.2 percent in May, and house and car sales taking off.’
It took a global economic downturn to reveal that ‘China has hit a new state of development, emerging as a consumer society wealthy enough to rival America as the world’s best customer.’
However, the economic stability or boom in China is not caused by consumer spending. The average and typical Chinese consumer is as cautious as any other consumer in the world during moments of economic crunch. In fact, ‘private consumption has been steadily declining for some time, going from more than 60 percent of GDP in 1968 to 36 percent of GDP in 2008.’
In China, the ‘real big spender is the government.’ China’s economic recovery is said to have been bought by the state. After all, China’s Communist Party has nearly $2 trillion in reserves. With a stimulus plan to the tune of 4 percent of GDP, or twice as much as that of the US, China can swim comfortably in the proverbial rough seas of global recession without having to borrow from anybody.
The Chinese government has been pumping funds into investments in infrastructure such as rail lines and roads, among others. Since the start of the year, government spending has been up by 30 percent. Government funds have also been poured into the construction of new community centers, convention halls, and sports facilities, as well as refurbishing and reviving idle factories, retraining workers, and augmenting income aid to local governments that have been hard-hit by the recession.
Via Newsweek
