Editorial: Keep steady in face of economic rebound

• Source: Global Times
• [01:37 August 05 2009]
• Comments

Recently, China has seen more signs of economic resilience. The GDP grew 7.9 percent in the second quarter of this year, after dropping to 6.1 percent in the first three months of 2009.

China’s manufacturing sector continued its recovery in July. According to a forecast from IHS Global Insight published in the Wall Street Journal yesterday, China may overtake the US as the world’s largest manufacturer by 2015.

In sharp contrast with the faltering economy of the rest of the world, these signs of recovery are really encouraging. Many people at home and abroad are very optimistic about China’s economic recovery and some foreign media even think China is rising to be the leader and even a savior of the global economy.
 
However, as China’s economy faces many problems and challenges, it is too early to say the country has already come through the global financial crisis safely and successfully. And it’s definitely too soon to talk about China becoming the world economic leader.

First, as the ongoing crisis has not yet hit bottom, many companies are still in financial difficulty and many more people could lose their jobs. According to official statistics, there are more than 9 million jobless people, 3 million of whom are graduates.

It is urgent to continue expanding domestic demand and creating more jobs by implementing stimulus measures in the second half. Otherwise, unemployment will restrict China’s economic recovery and harm social stability.

Second, it will take a long time for China to encourage consumers to spend more by measures such as increasing income levels and providing sufficient social security.

Now, consumer spending drives less than 40 percent of China’s GDP. By contrast, nearly 70 percent of the US’ GDP was created by consumer spending prior to the economic crisis.

Consumer spending is a fundamental driving force for economic growth. China has a lot of work to do in this regard. If individuals don’t benefit from the economic recovery, China won’t be a powerful country in the real sense, and it will find it difficult to develop a strong economy in the long-run.

Third, to stimulate the economy, the government invested a huge amount of money in infrastructure development. Simply boosting the GDP without also protecting the environment will have a harmful result. Short-term economic recovery should not come at the expense of sustainable development.

With many problems remaining, China must stay level-headed as many render predictions and judgments about its economic power. China’s chief responsibility is improving the welfare of its people, not rescuing the global economy.