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.