International Monetary Fund: China will be "an oasis" of stability in the global crisis
Beijing (AsiaNews/Agencies) - David Burton, head of the Asia-Pacific department of the International Monetary Fund (IMF), says that "with its robust reserves, I have no major worries about China, which will be a source of stability for the globe for the next year or two." But the optimistic forecast is not shared by Chinese leaders, who are now warning every day that Beijing will also be hit hard by this crisis.
Burton, on a visit to Hong Kong, said yesterday that the Chinese economy is slowing, and that in 2008 it could expand by less than the 9.3% projected by the FMI. Nonetheless, it still has about 2 trillion dollars in currency reserves, and a solid financial system. Burton therefore maintains that Beijing could redirect its economy, basing it not on trade with the United States, Europe, and Japan, but developing domestic consumption, reforming its finances, and allowing the appreciation of the yuan. He highlighted that China will spend hundreds of billions of yuan for infrastructure, like railways and urban services, and for reconstruction in Sichuan, destroyed by the earthquake in May. Beijing also wants to launch streamlined public building projects, with aid for low income people and rural areas.
Burton's optimism is not, however, shared by leading Chinese authorities. In an article that appeared yesterday in a state magazine, Prime Minister Wen Jiabao observed that the economy continues to slow, and that "without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development . . . and factors damaging social stability will grow." Chinese exports have declined particularly in sectors like manufacturing, which were strong for years but in October fell to their lowest point since 2004.
Zhu Min, deputy director of China's central bank, made comments along the same lines during a financial conference in Shanghai on November 1. He said that "the world's biggest economies, including the United States, Europe and Japan, are very likely to post negative growth and that will have a huge impact on China. China has already seen a sharp slowdown in industrial profit growth and fiscal income. The financial crisis will technically precede economic and political turmoil by eight to twelve months."
According to the national development and reform commission, economic growth will be at 9% in 2008, its lowest level for many years, but the fear is that it will slow down by even more. According to Stephen Roach, head of Morgan Stanley Asia, the recent declarations and measures by the authorities make it seem likely that growth will be below 8%, despite the official figures.
In order to stimulate the economy, the central bank has cut interest rates three times in two months, increasing tax rebates for exported products and cutting sales taxes.