The Chinese economy is doing very well against the background of the global financial crisis, the chairman of the Chinese Central Bank, Zhou Xiaochuan said during a press conference yesterday. The financial system of the nation is stable, whereas the economy of the country continues to cope with the financial crisis well. The absence of the liquidity crisis in the country is a peculiar feature of the situation in the banking sphere of China, which differs the nation’s economy from those of the USA, the EU and the majority of other countries.
China ’s powerful economy and enormous international reserves may eventually become the only potential platform for the recovery of the world economy. The Chinese GDP gained nine percent in the third quarter of the current year, having dropped 1.1 percent vs. the second quarter of 2008. Even if the national GDP reduces to 7.5 percent, as many analysts predict, the Chinese economy will continue to demonstrate outstanding dynamics.
The leaders of France and Russia put forward a suggestion to hold the meeting of the Group of 20 on November 15 in Washington to discuss the issue of the crisis and the reform of the financial system. The summit will be presumably devoted to the revision of the dollar-oriented structure of the world’s financial system. The USA may be deprived of its right to act as the financial regulator of the world.
The country with strong economy and currency that is capable of balancing the economic and financial power of the United States is supposed to make the landmark change. All other countries that have been invited for the summit will play supportive roles.
It is not the first time, when the world attempts to decrease the USA’s global financial influence. The European Union has already tried to improve its position in world trade by means of introducing the joint European currency. However, the US economic power and the crisis in world’s leading economies did not let the global financial system change drastically.
The majority of countries believe that a significant change in the financial organization of the world will save the planet from the crisis. Being unable to rely on their economies and currencies at the moment, the countries unintentionally look at China for assistance.
The main advantage of the Chinese economy is the increased home demand which supports the high speed of the economic growth. It can become a driving force for the growth of the Chinese economy, and may subsequently boost the economies of the rest of the world. The organizers of the upcoming meeting in Washington will most likely try to make China the leading state of the new historical process that will end the global crisis and the financial supremacy of the United States.
On the other hand, China has no reasons to dethrone the USA. In addition, China does not seem to be willing to build a new Bretton Woods system. China’s incredible economic growth became possible solely because of the United States and the economic system, which several countries would like to see transformed.
China has purchased $520-billion-worth bonds of the US Treasury during the recent five years. Its total reserves are currently evaluated at about $1.8 trillion. It means that the weakening of both the dollar and the US economic influence will strike a serious blow on China’s interests. If the dollar declines, China will have its assets reduced. To crown it all, the nation has reasons not to allow the strengthening of its currency, the yuan.
It is an open secret that the USA has many of its high-tech productions based in China. The weakening of the US economy will lead to their repatriation to create more jobs in the States. This will automatically trigger the growth of unemployment and the decrease in tax returns in China. China has also made billion-dollar investments in US companies and real estate. The fate of those investments directly depends on the economic situation in the USA.