How China took advantage of the global recession


by Sunny
7th September, 2010 at 1:55 am    

I suspect historians will look back one day at the global crash of 2008 and say what idiots western governments were at not having a bit of forward thinking on their minds.

Throughout the crisis, the Chinese economy continued to grow at an amazing pace, in part as a consequence of massive fiscal stimulus. When anyone wants an example of how effective a Keynesian counter-cyclical strategy can be, internationally as well as domestically, they need look no further than China’s four-trillion-renminbi stimulus of 2008-2009.

Apart from a six-month period after the September 2008 collapse of Lehman Brothers, in which trade finance stopped and the world did look as if it was close to Great Depression circumstances, China and other emerging markets helped those export-oriented industrial economies to recover.

It was not just Europe that benefited from China’s willingness to take on the mantle of “lender of last resort.” The new-found dynamism of African economies is a consequence of the Chinese drive to build up and secure sources of raw materials.

Unfortunately, the article is underlined by an assumption that the Chinese don’t care for multilateralism in a way the US does. This is rubbish. The US has ignored multilateral institutions when it was in its interest and China will do the same. In fact – it will learn from the US and, once powerful enough, will behave how Americans did.

It’s always been useful for the American right to disparage international institutions like the UN when it suited them. Soon they’ll be in the amusing position of demanding China listen to the UN in a way they never did themselves.


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  1. sai sundar

    RT @sunny_hundal: How China took advantage of the global recession http://bit.ly/cWpTCs


  2. Max Alter

    Pickled Politics » How China took advantage of the global recession: It's amazing that some on the US left think R… http://bit.ly/bNwx9e


  3. Free andEasy

    Pickled Politics » How China took advantage of the global recession http://bit.ly/bAa2DP




  1. shariq — on 7th September, 2010 at 5:18 am  

    Its kind of similar to how England and Australia used to ignore/control the International Cricket Council, but now that India is all powerful, they want it to be constrained by it. Of course the tragedy is that it would be for the good of cricket if India acted more multilaterally, but it doesn’t see the need to.

    Btw, from what I understand, China was able to enact its stimulus partly because it had infrastructure projects planned and it had several years of budget surpluses.

    Western governments on the other hand had already either spent the money, but even then, failure to have counter-cyclical infrastructure projects planned was a big failure. Its all good wanting to do stimulus, but you need worthwhile projects to spend it on. Admittedly, Britain already had more developed infrastructure than China, but there could have still been projects like broadband, high speed rail and dare i say it nuclear power.

  2. cjcjc — on 7th September, 2010 at 9:13 am  

    You do know that the story of China’s amazing resilience is nothing other than our old friend, a property bubble, don’t you?

    http://www.voxeu.org/index.php?q=node/5353

  3. MaidMarian — on 7th September, 2010 at 9:36 am  

    Sunny – the American Right would love nothing more than to make common cause with China in undermining the UN. Admittedly the UN is about the least democratic organisation I can think of, but that is for another day.

    It is also rather easier to make a stimulus work in a place like China. I seem to remember reading that about 45% of the cost of a UK nuclear power station would be the legal bills. They don’t really go for due-process in China.

    Also worth noting that some of China’s growth is down to a currency undervalued by 30% on most estimates.

  4. Blue Eyes — on 7th September, 2010 at 1:03 pm  

    A Keynesian counter-cyclical stimulus requires one thing which the British (and American) governments did not have: money saved during the “boom”. Australia and Canada are not mentioned by the Left because they have escaped the banking crisis pretty much unscathed, because they operated sensible policies in the preceding years.

  5. halima — on 7th September, 2010 at 3:30 pm  

    China’s stimulus package wasn’t just focused on infrastructure, but additional financing also went into social sector spending.

    But the recovery can’t be traced back to 2008/2009 alone and the stimulus response, surely it also has something to do with the way in which China’s economy is carefully managed, and always has been.

    China is in fact far more respectful of multilateral channels than many other countries I’ve come across – it doesn’t have a huge amount of time for cooking up bilateral agreements, but shows a lot of respect for the UN. I can’t say I’ve noticed this when I’ve worked with our American partners.

  6. Sunny — on 8th September, 2010 at 3:41 am  

    Also worth noting that some of China’s growth is down to a currency undervalued by 30% on most estimates.

    sure – but that doesn’t take away the point about working in multilateral environments.

    Shariq – the point about the ICC is exactly right.

    I do find it amusing how many political leaders in the west have their head in the sand about shifting political / ecnomic power to the east.

  7. joe90 — on 8th September, 2010 at 10:19 pm  

    In future China will have to listen to the UN?

    you having a laugh even tiny israel ignores the UN on nearly every issue.

    UN is nothing but an administration department of the US government as someone famously said.

    As for economics in the capitalist model everyone will suffer the big bubble crash one day china has avoided theirs for now.

  8. halima — on 12th September, 2010 at 6:40 pm  

    Hi Shamit, nice to hear from you, and yes, I’ve spent a year and half in Beijing now, and finally am feeling more comfortable in my skin. I thought maybe I’d put some words down on this thread because it’s always nice to read a living account of a city/country that we often read so much about in the papers. I am pleased I came, it’s important to see a country that will dominate so much of our lives – if it isn’t already.

    I’ve been amazed at the growth of the coastal cities, Beijing, Shanghai, etc, which though I read about it, it is still something to take in when facing the change in front of your eyes. It’s funny, there are armies of westerners here, much more compared with India, Nepal or Bangladesh, and they’re here because all the major companies are here, the number of development agencies and NGOs are fewer in numbers, rightly so. Beijing is as international as any other city – Prada, Apple store, Canon, to name but a few – and I’ve stopped counting how many Starbucks are within my walking distance. I live in a part of the city, which must’ve been designed by the same architects as Lower Manhattan, Canary Wharf – if not trained in the same style. I have to go a bit further into town to find more traditional parts of town – the Forbidden City, the temples etc, which begs the question how much of old Beijing will survive the wholesale modernization sweeping the city – every few months, there’s a new building or shop that’s popped up. Lots of Beijing old timers worry about the gentrification of their city – and the disappearance of history and culture, replaced with big shopping malls and office blocks. Beijing has quite a quirky, underground punk scene, with new music and art bubbling under the surface of the city’s orderly planning. There are quite a lot of artists moving over to Beijing because the live-work studio arrangement works better and the market hasn’t crowded them out yet – perhaps a bit like Berlin once. I also hear all the US and European business schools are sending their students to Shanghai because that’s where they think they will make their millions. Meanwhile, Guangzhou, nearer Hong Kong is where all of the world and Asia does business with. I bumped into two relatives from Whitechapel who were in Guangzhou for business, picking up supplies for their warehouse in East London. How is that for globalization?

    There’s also the large numbers of migrants moving about in the country – outside of a war, I think China has the largest movement of people in peacetime, and it is throwing up all sorts of problems, which is proving overwhelming for the government.

  9. halima — on 12th September, 2010 at 6:42 pm  

    Han Chinese culture dominates everything, and there are attempts to put a Han Chinese stamp onto everything. Shame really, China is much more than Han China. I hope to be traveling a little more to Guizhou and other parts of the country in the western areas that have been left behind the economic boom. If you imagine the size of China you’ll know that this would mean some provinces like Gansu have the same population as Yemen, and the richer provinces are as rich as Portugal. The diversity in economic fortunes between the coastal belt and the western regions is mind-numbing. The government, will, of coarse, be developing these regions – imagine that, coastal cities moving on to do value-added sectors to compete with London and Paris, and the less developed regions continuing to do manufacturing and competition based on cheap labour – it’s got to be a win-win strategy for the next 20 years.

    The economy is as ever talked about so much – and yes, there is a property bubble, as there is everywhere in fast growing economies, but the main driver for growth is exports and an expanding domestic market – imagine the size of this domestic market which hasn’t been exploited yet.

    Finally, though, the topic that continues to interest me and is relevant especially for this site – is the pending India-China rivalry – who will rule the world? I would love to see an article from one of the PP editors on the much talked about competition between India and China – which has the edge…

  10. Shamit — on 12th September, 2010 at 9:43 pm  

    Hi Halima – good stuff. Thank you for writing

    Last time I was in China was before 9/11 and that too in Shanghai only.

    I too am interested in the India – China rivalry – both political as well as on the economic front. I have been doing some reading around the issue and in my recent travels to India I posed this question to few people – some who have factories there as well as some those involved in bureaucracy and armed forces.

    Another interesting aspect of the debate is the Indian Chinese – born and raised in India – carrying Indian passports and very loyal to India – very affluent. I would try to put together some coherent thoughts and forward it on to Sunny/Rumbold to see if they would publish it.

    Good to hear from you again.

  11. Jai — on 13th September, 2010 at 10:40 am  

    Shamit, Halima,

    I too am interested in the India – China rivalry – both political as well as on the economic front. I have been doing some reading around the issue….

    Finally, though, the topic that continues to interest me and is relevant especially for this site – is the pending India-China rivalry – who will rule the world? I would love to see an article from one of the PP editors on the much talked about competition between India and China – which has the edge…

    A couple of weeks ago, Fareed Zakaria had a detailed discussion about this topic on his GPS show on CNN. He interviewed Robert Kaplan from the Center for a New American Security. It was a brilliant (and very thorough) strategic analysis, and you can read a full transcript of their conversation below:

    http://archives.cnn.com/TRANSCRIPTS/1008/29/fzgps.01.html

    Robert Kaplan was also interviewed by the Council on Foreign Relations a few months ago, and discussed the geopolitical and military implications of China’s continued rise in extensive detail. The article expands on some of the areas covered in his more recent CNN interview. India is also mentioned numerous times:

    http://www.foreignaffairs.com/discussions/interviews/qa-with-robert-kaplan-on-china?page=show

    Both articles are absolutely superb. I think you’ll find them fascinating reading.

  12. halima — on 15th September, 2010 at 10:23 am  

    Hi Shamit,

    Well I look forward to reading your piece. Interesting to also see how Indian Chinese might differ from, say, other long-term Chinese populations settled in South Easia and so on. I once heard a joke in India, for the person on the street in India , globalisation means only one thing: Chinese goods. Please write it quickly!

    India and China’s rivalry in South Asia will I hope benefit the smaller players – Bangladesh and Nepal which is already showing impact. Hurray!

    Jai – yes, fascinating piece , thanks for sharing it, and exaclty what I had in mind when I mentioned the Indian-Chinese rivalry. Chinese involvement along ports in South Asia (Sri Lank and Bangladesh) is going to change the whole face of South Asia as we know it.

    I will read the Kaplan piece when I have some more time (sitting in a cafe in Kashgar at the moment and my brain is swtiched off). A fascinating but little known fact is of coarse that America fought the Vietnam War against a Chinese threat, not a Russian one. As a history student, too, the first thing I was taught from day one is to look at the map.

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