“At this critical juncture of countering the financial crisis, I called for perseverance, as perseverance will lead us to final victory. The dark cloud of the financial crisis will disperse. Let us work together for a more splendid future,”
—Chinese Premier Wen Jiabao
In Chinese astrology, 2009 is the year of the ox, a symbol of wealth created by strength, hard work and perseverance. Those born under the sign of the ox are thought to be quiet, patient and determined. That’s an auspicious sign for China’s stimulus plan and newly resurgent economy. But those born under the sign are also thought to be stubborn, eccentric and quick to anger.
As the global economic slowdown approaches the end of its second year, China’s economy appears to have pulled out of the downturn and to have done so with miraculous speed and strength, creating 6.7 million jobs, an enviable feat that the U.S. economic stimulus plan has yet to pull off.
“The evidence is overwhelmingly clear that China’s economy bottomed out in the fourth quarter [2008],” says Nicholas R. Lardy, senior fellow at the Peterson Institute for International Economics. On an annualized, quarter-over-quarter basis, Q4 growth was at about 4 percent. “It was 8 percent in the first quarter and 14.9 percent in the second quarter. So this is the earliest and most rapid recovery of any globally significant economy,” he explains.
Although some scoff at China’s reported economic statistics, Lardy says they are largely corroborated by other evidence, including industrial production and import numbers, which are growing relative to exports and their trade surplus, which has begun to shrink dramatically.
To fully appreciate the magnitude of China’s recovery, it is important to understand its recent history and how the economic crisis manifested in the country.
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Starting in the 19th century, China endured civil unrest, major famines, military defeats and foreign occupation, according to the Central Intelligence Agency’s World Factbook. After the Chinese Civil War and victory against the Chinese Nationalist Party in the early 1950s, China was unified under Mao Zedong, chairman of the Communist Party of China. Since then, the country has been ruled by a totalitarian government.
Chairman Deng Xiaoping succeeded Mao in the late 1970s, and the party began instituting market-oriented economic development in 1978, including liberalized prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, development of stock markets, rapid growth of the nonstate sector, and the opening to foreign trade and investment. The county had quadrupled its economic output by the year 2000.
“What is going on in mainland China is...