Economists play down 'China factor' in global recovery

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(Xinhua)
Updated: 2009-03-10 00:05

A China-driven recovery of world economy is "unrealistic", economists said amid hope, after the world's attention was drawn to China's annual parliament session, that the country's stimulus plan would help the whole world out of the recession.

Global stock markets reacted with big fluctuations to anticipation and disappointment to China's stimulus measures last week when Premier Wen Jiabao unveiled a massive investment plan, including a record-high 950 billion yuan ($139 billion) budgeted deficit, to boost public spending.

The country also announced a 4-trillion-yuan ($585.5 billion) stimulus package in November.

The global stock jumps and plunges put the "China factor" into the spotlight, with questions on how much China could and should do to drive impetus into world economy for a global recovery from the financial crisis.

Economists said they believe China would be able to keep its growth at about 8 percent this year, a growth rate long believed to be minimum to create enough jobs and maintain social stability.

However, they said it is wild wish to count on the country alone to fuel the global recovery, as China's economy accounted for only five percent of the world's total.

To pin hope of the global recovery only on China is similar to charging a colt with an overwhelmingly big carriage and hoping it to drag the cart along, they said.

Beijing-based economist Wang Xiaoguang warned that actually China's influence is very "limited."

He said China's stimulus package might help store up some investors' confidence in world economy, but "China alone could not revive the world."

"Falls and rises in stock markets are sometimes related to short-term factors, and in some cases rises could even be a result of market rumors," said Jia Kang, president of the Institute of Fiscal Science under the Ministry of Finance.

"Such fluctuations cannot reflect, not to say change, the basic structure of the world economy," he said.

China's gross domestic product (GDP) reached more than 30 trillion yuan (4.4 trillion U.S. dollars) last year to account for about 5 percent of the world's total, according to Jia, also a member of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC).

He pointed out the figure is far lower than the proportion of the European Union, and the United States, the economy of which accounts a quarter of the world's total.

"It's utterly explicit if you want to tell who can take the lead," he said. "There is too much exaggeration in saying that China can fuel the global economy and rescue the world."

But we can be certain that China's growth is a positive factor in the global economy, he said, and the country can also contribute more to an increment in the world economy this year, as many others would add little, or even zero.

Premier Wen said last week China aimed to expand the economy by 8 percent this year. The growth could be a relief to the world against a forecast, by the World Bank on Monday, of a possible first decline in the world economy since World War II.

The report also said the world trade is to record its largest decline in 80 years this year, with the sharpest losses in East Asia.

Jia said overseas media reports used to stoke either "China threat" or "China collapse" sentiment in the past. "The situation is improving and they are more objective now, but there is still misunderstanding from time to time."

Actually, China is facing "unprecedented difficulties and challenges" this year, as stated by Premier Wen in his government report delivered to the National People's Congress, Jia said.

"China should first see after its own affairs this year," he said, adding the biggest contribution China can make in the crisis is to run its own affairs well, echoing the same statement of top leaders last year.

Hao Ruyu, deputy head of the Capital University of Economics and Business, told Xinhua that China's measures to boost the economy and a possible recovery in the country are apparently "good news" for the world economy.

"It's solid truth that some of the economic indicators are pointing to positive signs, after the country made bold moves to stimulate the economy since last October," said Hao, also an NPC deputy.

He referred to the 4-trillion-yuan stimulus plan, a plan to expand rural consumption of home appliances, and support plans for 10 key industries.

Statistics showed that China's manufacturing activity contracted for a fifth straight month in February, but the depth of decline narrowed, and new loans last month continued to grow at a fast pace, suggesting more robust economic activities in the country.

However, Hao agreed with Jia and said it's "unrealistic" to count on China alone to drive the global economy, saying China's 5-percent weight in the global economy is limited in impact and scope.

Zheng Xinli, deputy head of the Central Policy Research Office, the top think tank of the Communist Party of China, expressed more optimism in China's role in a global recovery.

"It is a demonstration of China's continuous growth over the past years and its increasing contribution to the world economy for overseas investors and media to look to China for hopes of recovery," he told Xinhua.

China's contribution to the world economy is not very big in terms of gross product, but the country is already making a significant contribution to the increment in the world's total gross product, he explained.

"China's boost on domestic demand might lead to more imports from other countries, so it makes sense for the world to look to the country," said Zheng, also a member of the 11th CPPCC National Committee.

The industrialization and urbanization of developing countries like China, coupled with capital and technologies from developed economies, would create huge demand that could help lead the global economy out of the recession, he added.

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