Research

Abstract

The note particularly discusses real economy in China, which has been hit hard by the global crisis, but has been holding up. Indeed, China has weathered the storm better than many other countries because it does not rely on external financing, its ... Show More

The note particularly discusses real economy in China, which has been hit hard by the global crisis, but has been holding up. Indeed, China has weathered the storm better than many other countries because it does not rely on external financing, its banks have been largely unscathed by the international financial turmoil and it has the fiscal and macroeconomic space to implement forceful stimulus measures. As the global crisis has intensified, however, China's exports have declined sharply, and this is affecting market-based investment and sentiment, as well as employment, notably in the manufacturing sector. Although China's growth is set to decline, it is still likely to be higher than in most other countries. However, the continued global crisis is bound to contain China's growth in 2009 and 2010, especially via weaker exports and market-based investment. Nonetheless, China's economic fundamentals are strong enough to allow policymakers to consider policies that will affect the economy well beyond 2009. There are useful synergies between China's short and medium term policy objectives. Financial sector reforms will help. They will help China manage the downturn and facilitate the transition to a more balanced economy. Show Less