China was the first major country to feel the impact of the financial crisis. In August 2008, it noted that “the era of low costs and high growth has come to an end for China, and an economic restructuring is inevitable”.
Since then, of course, China’s export-dependent economy has meant it has been one of the worst-hit economies. GDP growth fell to 0% in Q4 last year, when 23m jobs were lost. Thus the blog was fascinated to read a detailed status report on the government’s recovery efforts by Premier Wen Jiabao in today’s China Daily.
Wen says China has so far only replaced 6.66m of the lost jobs, and warns that “to counter the global financial crisis is a long-term and arduous task“. He adds that “the impact of the crisis is as strong as ever and is unlikely to disappear anytime soon“. And he worries that “the stabilization and recovery of the Chinese economy is not yet steady, solid and balanced. With many uncertainties remaining in the prospects of the world economy, we still face tremendous pressure of the decline in external demand”.
Last year, exports represented 37% of China’s GDP, and these are still down over 20% versus 2008. Just replacing this volume is itself a major task. Wen is therefore only being realistic when he suggests that “perseverance” is required as boosting “domestic demand is a long-term strategic policy“, and not the ‘quick fix’ assumed by financial markets.
Any executive whose business depends on China, directly or indirectly, would probably find the full speech well worth reading, for the perspective it provides on the government’s current ambitions and future goals.