Stephanie Flanders: Optimism About China’s Economy

Stephanie Flanders, the BBC’s economics editor writes on her blog:

The Chinese authorities have impressed the world before with their response to economic crises – for example during the Asian financial crises of 1997-8. This crisis is of a different order. But so has been the response.

As a share of the US economy, China’s fiscal stimulus measures this year are larger even than America’s. While the loosening of credit conditions is greater than any that O’Neill has ever seen.

All this policy seems to be having an effect. He’s just raised Goldman Sachs’ forecast for Chinese growth this year from 6% to more than 8%, and next year’s from 9% growth to nearly 11%.

This optimism gets support from stories on the ground. Qu Hongbin and Sun Junwei, of HSBC, just returned from a tour of three big cities in inland provinces, which were never as dependent on exports as the coast.

They say that firms there are already benefiting from all the new infrastructure projects that the government is putting on stream. And consumer spending is holding up as well, growing at annual rates of close to 20%.

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