adminIndustrial nations are deeply mired in a substantial slowdown, high unemployment rates and a messy sovereign debt crisis, while emerging markets are carefully balancing their fights on inflation and fine-tuned easing measures to spur growth amid deteriorating external conditions.
But China, which officially overtook Japan as the world’s second largest economy this year, has remained a much-needed bright spot in the world economy as growth in the country, though slowed a little, remains well above the global average.
With an enormous and highly competitive manufacturing base, China has long been dubbed the Global Workshop. But, with an increasingly prosperous middle class and ever expanding domestic demand, the 1,3-billion strong Chinese consumers are also creating one of the biggest markets for products from all corners of the world.
China’s newly found role as a global market will be further cemented as the country firmly implements economic adjustment in light of the global financial crisis — cutting its over-reliance on exports and fully developing the potential of the domestic market.
The process will prove not only to be a boost to the fragile world economy, but also a boon to the long-term sustainability of the Chinese economy.
The outbreak of the global financial crisis ushered in one of the most volatile economic times in the six decades since World War II.
After a relatively swift rebound from the second half of 2009 to 2010, the global economy seemed to run out of steam in 2011 as the effect of unprecedented government stimulus measures wore off and the private sector failed to pick up the task of jump-starting the stalled economy.
“The strong cyclical rebound in global industrial production and trade in 2010 was never expected to persist,” the International Monetary Fund (IMF) said in its September World Economic Outlook report, entitled “Slowing Growth, Rising Risks”.
“However, in crisis-hit advanced economies, especially the United States, the handover from public to private demand is taking more time than anticipated,” it said. “In addition, sovereign debt and banking sector problems in the euro area have proven much more tenacious than expected.”
According to the global lending institution, developed countries, which have driven the global economy for many decades, may see growth slow to 1,6 percent from 2,2 percent last year.
Things are most serious in Europe, where the ongoing sovereign debt crisis has raised unprecedented fears among global investors that a disorderly default by some debt-ridden countries could cripple the European banking system, create a credit crunch and plunge the world economy into another severe recession, or even worse, threaten the very existence of the eurozone.
On the other side of the Atlantic, the US economy picked up some steam in the third quarter with an annualised growth rate of 2,5 percent, yet was still well short of what was needed to put many of the 14 million unemployed Americans back to work, or to slash its soaring public debt of US$15 trillion.
The world’s largest economy was stripped of its top-level credit rating in August by one of the three major ratings agencies. Investors, both inside and outside the country, have been sounding the alarm over the long-term sustainability of the US fiscal policy, with the major political parties entrenched in a bitter partisan fight and doing nothing to put the country’s fiscal house back into order.
At the same time, the developing nations, which enjoyed robust growth in the initial phase of the recovery, are also seeing their economic activity slow to a pace of 6,4 percent, instead of a previously estimated 6,6 percent for this year, according to the IMF.
Emerging economies have to deal with problems like weakened demand in industrial countries, crude oil prices of more than US$100 a barrel and volatile fluctuations in exchange rates.
The bleak economic picture of both the North and South deeply eroded the confidence of business and consumers, trapping the world economy in a precarious position.
Against this backdrop of sluggish world economic recovery, China, which emerged from the severe global economic downturn largely unscathed, continues to be a bright spot, with growth expected to reach nine percent this year, outshining every other major economy in the world.
IMF economist Sun Tao told Xinhua: “In 2011, China maintained rapid economic growth against the headwind of sluggish world economic recovery and volatile global financial market. The economic recovery was on a solid footing driven by vigorous domestic and external demand.
“With the proactive and extensive use of macroeconomic and financial policies, China managed to alleviate the inflation pressure in the consumer goods and asset markets. All these impressive achievements demonstrate the robustness of China’s growth momentum and policy endeavour,” he said.
Ten years after China’s entry into the World Trade Organisation, it has built a complex and substantial trading network with countries around the world, which means the country’s rapid economic growth is not only benefiting its own people, but also helping to spur economic growth in its trading partners.
China’s demand for crude oil and other raw materials has been a major boost to resource-rich countries such as Australia, Brazil and Angola. Its role as one critical part of the global supply chain also means it has been importing large quantities of electrical components from countries such as Japan and South Korea.
Furthermore, its 1,3 billion consumers are increasingly buying all kinds of goods, from tropical fruits from Southeast Asia to high-end luxuries from the United States and Europe. ‘ “China’s robust economic growth in 2011 was a vital contribution to the world economy. First, it strengthened the global efforts in preventing a sharp economic slowdown; second, it helped prevent a systemic loss of confidence in the global financial markets amid the global financial crisis; third, it might help create some accommodative room for the crisis-hit countries to take decisive structural reforms,” Sun said.
For many countries, the booming Chinese economy offers them great opportunities in terms of export and investment.
According to statistics from Indonesia’s trade ministry, in the first nine months of this year, the country’s export of non-oil/non-gas products to China surged by 60,1 percent on a year-on-year basis, offsetting a fall in exports to the US market.
To ensure sustainable economic development in the medium term, China has stepped up efforts to implement economic reforms as outlined in the 12th Five Year Plan, which means economic growth will slow a little in the next five years, but is necessary to prepare the country for future growth.
Last month, China’s exports expanded only 13,8 percent year on year, the lowest in nine months, while imports increased by 22,1 percent, following October’s surge of 28,7 percent. The narrowing trade surplus accords with the government’s forecast that the country’s trade surplus this year will drop to US$150 billion from around last year’s US$183 billion, the third straight year of decline.
The target has shown Beijing’s determination to develop a more balanced economy by boosting domestic demand and steering it away from the previous heavy reliance on exports.
The expansion of the domestic market will create a crucial export market for the goods and services of other nations, creating more job opportunities and boosting economic growth.
Given the anaemic performance of the global economy this year, several think tanks have raised the possibility of a full recession next year, dimming the already grim picture for economic recovery.
It is true the future will be fraught with challenges, but some recent political and economic achievements have offered us hope that the worst scenario is not likely to come true.
European leaders last Friday reached a historic deal to impose tougher budget discipline on eurozone countries to stem the crippling debt crisis.
The fiscal compact, endorsed by all eurozone countries, would build a deeper economic and fiscal union for the eurozone and thus substantially bring integration of the continent to a higher level.
In the United States, recovery is catching some wind in its sails. US manufacturers report that North American business demand is improving. Retail and auto sales are picking up, while unemployment last month dropped to its lowest point since the spring of 2009.
As for China, the country will continue to serve as a strong engine for world growth in 2012.
China will seek stable and relatively fast economic growth next year amid the “extremely grim and complicated” global outlook, according to a statement issued after the closure of a three-day central economic work conference yesterday.
The conference agreed to set the main theme of next year’s economic and social development as “making progress while maintaining stability,” the statement said.
Though a slowdown of GDP growth is expected next year, the growth rate will remain at a comfortable level, both Chinese and foreign economists have predicted.
In the year to come, China is not, and does not intend to be the world’s saviour. But the country, with a strong growth momentum, is ready to face the challenges ahead with the world again to help achieve a full and sustainable global economic recovery. — Xinhua.
Online Reporter