Ambitious Stimulus Plans Help China to Weather Downturn
Most countries would be delighted with a 6.5% rate of economic growth this year, but in the case of China, that figure is seen as a disappointment. Still, Standard & Poor’s believes that China’s ambitious stimulus plans will bring about a rebound in the second half of this year.
“In third quarter 2008, real GDP growth for the world’s third-biggest economy, after the U.S. and Japan, slipped below 10% for the first time since 2006, to 9.0%. It slowed further to 6.8% in the final three months of 2008 to bring the full-year growth figure to 9.0%.”
“Standard & Poor’s Ratings Services expects further economic weakness for China in early 2009 but sees a rebound within the year to bring the annual growth rate to 6.5%–significantly slower than 2008’s 9.0%.”
And we believe China is likely to weather the downturn better than most others, in large part through its ambitious stimulus plans.
S&P expects the yuan-dollar exchange rate to remain broadly stable in 2009. Nevertheless, the effective exchange rate has appreciated significantly with the U.S. dollar. “China’s current export slowdown, however, is due more to the global economic crisis than to the strength of the yuan. So engineering a yuan depreciation would be likely to increase tension with major trade partners and yet deliver very little boost to exports.”
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