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    » 10/27/2008, 00.00

    CHINA

    China is in good shape, but must not underestimate the global crisis



    The director of China's central bank, Zhou Xiaochuan, illustrates the situation in the country and the possible strategies for addressing it. Beijing is demonstrating caution in anticipation of seeing how significantly the worldwide crisis might strike it, but is confident that it will be able to continue its rapid growth.

    Beijing (AsiaNews/Agencies) - The Chinese economy is in good health, but must not underestimate the repercussions of the global financial crisis, which has already struck stock markets in Asia and could cause a reduction of foreign demand for products, with consequences for the country's strong export market. This is the opinion of Zhou Xiaochuan, head of the People's Bank of China, who yesterday told the permanent committee of the national people's assembly that China is in a better situation than many other countries, because it has sufficient liquidity and its financial institutions are on a solid foundation.

    Zhou (in the photo) explains that the collapse of stock markets, the high unemployment in the United States, the recession in the European Union, and the economic contraction that seems to be approaching in Japan could reduce demand for Chinese products, which have always been sent in particular to these markets. The reduction in demand would also bring down commodity prices and moderate inflation. "As the next stage, the People's Bank of China will adopt flexible and cautious monetary policies to stabilise inflation, the yuan and the financial market," says Zhou. There are also expectations for tight control of liquidity, financing, and the flow of capital abroad, to avoid volatility in the currency and financial markets.

    Over the past few months, since the onset of the worldwide financial crisis, the yuan has stopped appreciating against the dollar, holding steady or even losing value. Meanwhile, the government has announced various measures intended to foster domestic consumption: like a cut on taxes for domestic products, and the promise of more investment in public works projects.

    Asian economies, remembering the disastrous crisis of 1997, have large foreign currency reserves. China stands out, with reserves estimated at about 1.8 trillion U.S. dollars, although today this sum serves above all to support U.S. debt, which could not be monetized and placed on the domestic market in the short term.

    For months, U.S. Treasury Secretary Henry Paulson has been trying to attract more Chinese investment in the United States economy, and to convince Beijing to open itself to more products from U.S. companies.

    Other economists maintain that Asia, and China in the first place, could ask for a "rethinking" of international financial institutions, taking on greater power in keeping with their increased economic power.

    Meanwhile, Beijing is being very cautious: yesterday, Prime Minister Wen Jiabao, concluding the Asia-Europe meeting in Beijing, promised that China will play "an active role" in the November summit of the 20 leading world economies. But he did not explain further.

    Of course, no one can say how much the current crisis will affect Chinese growth, and in recent days Justin Yifu Lin, chief economist for the World Bank and previously a professor at the University of Beijing, estimated that this could be between 8% and 9% in 2009, contradicting more pessimistic estimates.

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    See also

    03/03/2009 INDIA
    Exports collapsing, at least 10 million jobs at risk
    In recent months, the country has suffered the effects of the global economic crisis to a much greater extent than predicted. Now there are questions about the consequences for the farming industry, and for the 220 million people already under the poverty level.

    18/09/2015 CHINA-USA
    “Hightened concerns" about growth in China among the reasons for the Fed zero rate
    For Janet Allen, head of the Fed, China and emerging markets have uncertain outlooks. The Shanghai stock market recovered slightly despite a bad week. Skepticism about China, the US and world economy.

    23/02/2009 CHINA - UNITED STATES
    China and U.S. breathe sigh of relief: economy more important than human rights
    For Mrs. Clinton, human rights will no longer be the main issue. In exchange, Beijing has decided to continue buying U.S. Treasury bonds, in order to support the American economy.

    25/11/2008 CHINA
    World Bank: Chinese growth will fall to 1990 levels
    The World Bank warns that the situation could become even worse. Beijing, preoccupied over rampant unemployment, is addressing the problem by stimulating domestic consumption. But meanwhile, it is unable to contain the growing social protests.

    03/01/2009 ASIA - CHINA - U.S.
    Chinese yuan set to replace dollar
    Beijing has launched the experiment of using the yuan as a reserve currency in relations with 8 countries. Chinese exporters are asking to charge in yuan instead of dollars, because the U.S. currency is losing value. But China needs to revise its model of development, too much inspired by eighteenth century mercantilism.



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