Can China Lead a Recovery?
One year after the global economy went into a tailspin, many economists are wondering whether Chinese consumers, once a thrifty lot, will lead the world out of the recession. Last week, the International Monetary Fund said China would do just that, thanks in part to the government’s $600 billion stimulus package and a flood of bank lending. The IMF increased its forecast of Chinese growth to 8.5 percent in 2009 while lowering its forecast for the U.S. economy, which it said would shrink 2.7 percent.
In the past, yanking the world economy out of the doldrums has been the job of American consumers, who have accounted for about two-thirds of U.S. gross domestic product and who for years bought enough imports to keep factories running from southern China to northern Mexico to central Europe. But as debt-laden American consumers tighten their belts, some officials hope that Chinese consumers will loosen theirs.
As a result of the crisis, the U.S. household savings rate has increased to 5 percent from 0 percent, IMF Managing Director Dominique Strauss-Kahn said in a recent interview. While that may be good for global trade and financial balances, he said, it raises the question of which consumers will fill the void and become the new engine of global economic growth. If the most likely candidates are China, India and Brazil, it remains to be seen what kinds of products those consumers will demand, and from whom.
Part of the answer will come this week, often known as retailers’ “golden week,” when Chinese consumers — many of then flush with bonuses — go shopping to celebrate the holiday marking the 1949 Communist revolution.