CHINA
What is the impact of the global economic decline
on the world’s fastest growing economy?
BY DAN WATSON
CONTRIBUTING EDITOR
The world is very familiar with
the unprecedented economic
growth enjoyed by China over
the past few years. However, China,
similar to other countries, has seen its
financial engine slow owing mostly to
the global economic decline. For
instance, China’s economy grew at
6.1% in the first quarter of 2009,
which is the slowest rate of growth in
nearly a decade, down from the 6.8%
realized last quarter and from the
10.6% level year-on-year.
Gross domestic product (GDP)
reached 6. 6 trillion Yuan (
approximately US$939 billion) during the
first quarter. Meanwhile, overall
industrial output grew 5.1 percent
for the quarter and gave encouraging signs of continued improvement.
Recent China Government supplied
data indicated that industrial output grew 8. 3 percent in March 2009,
supporting the premise that the
Chinese market is rebounding somewhat. However, continued increases
in unemployment throughout China
may erode both the output for the
second quarter and the enthusiasm
for a rebound in the economy garnered during the first quarter.
At the end of 2008 China
announced that it would be initiating
an economic stimulus package valued at more than US$580 billion. A
good portion of this package was ear-marked to expand China’s infrastructure (i.e., roads, airports, train
lines, electric power, etc.). Shanghai
airport has already announced plans
for serious upgrades and in Beijing,
The rapid construction of Shanghai 2010 Expo sites and buildings is going on at full speed
preparing for the grand opening in May 2010. The repainting of the outsides of all the elevated
roads in Shanghai in preparation of the 2010 Expo will take large quantity of exterior coating.
where highways already exceed
20,000 kilometers, there are plans to
construct another 5,000 kilometers
over the next two to three years.
Tianjin plans to build at least nine
additional subways. China has also
indicated that investments in
Zinjiang power grid will double that
of last year. China will also use part
of the stimulus package to increase
subsidy for auto, home and appliance
replacements. With the fall off in
exports, China is hoping to increase
domestic sales.
China’s consumer price index (CPI)
and producer price index (PPI)—two
major indicators of inflation—appears
to have declined 1.2% and 4.6%,
respectively, while retail sales grew 15
percent. Other positive areas in
China’s economy were a 28.8% rise of
fixed-asset investment compared with
last year, to a level of $411 billion.
Figure 1 highlights China’s GDP versus other Asia/Pacific countries.
Another interesting measure of how
well China is weathering the economic
storm is the level of foreign investment
recorded. Foreign direct investment
declined 20.6% in the first quarter of
2009 compared with the same period
last year, with investments totaling
$21.8 billion. Of course, this data point
relates more to the overall health of
those countries who would normally be
investing in the future of China as a
growth engine.
Over the past few years the Chinese
