Posted by: Dexter Roberts on April 18, 2009
A rare bit of optimism when it comes to the world economy emanated today from China’s tropical south. The occasion: the annual Boao Forum for Asia which opened Friday on the island of Hainan bringing together more than 800 business leaders, policymakers, and heads of state including from Pakistan, Mongolia, Kazakhstan, New Zealand, and Finland.
In a plenary address on a rainy Saturday morning, China’s premier Wen Jiabao struck an upbeat tone: “China’s [stimulus] package plan is already paying off and positive changes have taken place in the economy,” Wen said in the Boao Sofitel Hotel, referring to the $586 billion earmarked to keep China’s economy from slipping into the economic doldrums. “The situation is better than expected.”
Wen also added that 2.7 million jobs were created in China’s cities in the first quarter of this year, a key aim of the package, given the challenge of rising unemployment particularly amongst migrant workers in China’s export-oriented factories. Wen’s comments follow the release of economic statistics earlier in the week showing China’s economy has grown 6.1% in the first quarter—the slowest rate in almost a decade, but still a figure that most countries would be delighted to report. Rapid loan growth, a pick up in fixed asset investment, and record car sales in March have all been encouraging signs. Indeed many analysts are now predicting that China’s economy has bottomed out and so are revising upward their gdp estimates for the year to closer to the 8% target China has set.
A key question remains of course: how sustainable is the growth China is now seeing and will it translate into higher consumer spending, a key priority for Beijing as it struggles with a continuing drop in exports. The less optimistic are pointing to the fact that China has already pumped 4.5 trillion yuan of new loans into the economy, the majority of its target of “over 5 trillion yuan” for the entire year. “Confidence is more important than currency or gold,” Wen said. “Today, I want to say that hope is also important. It’s like a beacon,” he said in closing his speech. Lets all hope the optimism proves well founded.