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China: Unscathed through the Global Financial Tsunami

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  • Mingchun Sun

Abstract

This paper investigates the reasons behind the resilience of China's economy to the global financial tsunami. China's economy is lowly leveraged in its banking, household, public and external sectors and, therefore, is less plagued by the global deleveraging than most developed economies. Chinese domestic sectors have improved significantly over the past decade, giving them larger capacity to cope with external shocks than during the Asian financial crisis a decade ago. Contrary to the conventional wisdom that China's economic growth is highly dependent on exports, we find that the main growth engine for China is domestic demand. Destocking, rather than falling exports, was the main cause of the sharp economic slowdown in China in late 2008 and early 2009. Therefore, the global economic slowdown should have limited impact on China's economy. We forecast a sustained economic recovery in China in 2009-2011, with real GDP growth exceeding 10 percent in 2010. Copyright (c) 2009 The Author Journal compilation (c) 2009 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

Suggested Citation

  • Mingchun Sun, 2009. "China: Unscathed through the Global Financial Tsunami," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(6), pages 24-42.
  • Handle: RePEc:bla:chinae:v:17:y:2009:i:6:p:24-42
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    Cited by:

    1. Fran├žoise Lemoine, 2010. "Past Successes and New Challenges: China's Foreign Trade at a Turning Point," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(3), pages 1-23.
    2. John Whalley & Xiliang Zhao, 2013. "The relative importance of the Chinese stimulus package and tax stabilization during the 2008 financial crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 20(7), pages 682-686, May.

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