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China to come out of economic crisis strong: analyst

(Xinhua)
Updated: 2009-09-18 10:48

China has fought off the economic crisis and will be among the strongest countries to weather the impacts, political analyst and Newsweek editor Fareed Zakaria said in an interview with Xinhua.

Zakaria, also a CNN host, said some of the decisions made by the Chinese government before the crisis could be seen as "very wise."

China was the only major country in the world to have entered the crisis with a budget surplus, which put the government in a better position to spend, he said.

The government also made it difficult to get loans in 2007 because they were worried that the economy was growing too fast, Zakaria said.

When the financial crisis erupted last year, the Chinese government forked out 4 trillion yuan ($585.7 billion) in a stimulus package to stave off the negative effects of the crisis. The stimulus was backed by a proactive fiscal policy and moderately easy monetary policy, which have together restored China's gross domestic product growth to 7.9 percent in the second quarter this year, from 6.1 percent in the first quarter, he said.

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Zakaria said the stimulus package, although small in dollar terms compared with that of the US, was larger in terms of the percentage of its GDP, so the impact would be equally substantial.

He said key economic data showed the Chinese economy had been bouncing back and would come out of this economic crisis very strong. The shape now is a "V", he said.

"I also think that what is going to happen with the Chinese stimulus is the building of a truly excellent infrastructure for the next group of Chinese cities," he said. "I think that is going to provide another boost of economic growth for the next 20 years, just as the previous one provided."

Although the Chinese economy is showing positive signs, a full recovery is still to some degree dependent on tapping consumption potential, both domestically and externally.

"Either one of two things has to happen: Americans have to start buying things, or Chinese have to start buying things," Zakaria said.

"The problem is American consumers really are repaying debt right now, they are very unlikely to do that (start spending). The Chinese consumers will start spending, but the consumer base, compared to the huge buying power of American consumers, is still small," he said.

"Until the American consumer starts spending again, you will not see the kind of economic growth anywhere in the world that you saw between 2005 and 2007," he added.