Secure economic recovery with cautious optimism
- Source: Global Times
- [03:19 September 25 2009]
- Comments
The two-day G20 summit in Pittsburgh has had an immediate effect on world stock markets. Mounting worries among investors that governments may start to withdraw some economic stimulus measures after the summit led to a stock drop in many markets in Asia and Europe, and a slightly higher opening on Wall Street on Thursday.
In contrast to the wait-and-see mood of caution among stock market investors, a mood of over-optimism is pervading the Pittsburgh summit.
With "green shoots"starting to grow here and there, some have jumped to the conclusion that the "bull"is likely to take over the "bear,"and the devastating recession appears to be ending.
But just as in the stock market, an overly-optimistic mood can be as damaging as a pessimistic one at this critical moment of world economic recovery.
The past two G20 summit meetings played a crucial role in pulling the world out of the slump with joint efforts, which seem to have been somewhat undermined in the Pittsburgh summit.
Overly-optimistic on their domestic outlooks, the G20 member nations are divided on future coordinated actions to boost the economy.
With a perilous floodgate likely to be opened by rising protectionism, it remains to be seen whether the summit will come up with a strong and clear message against protectionism.
Over-optimism will not work for China, either. Given the increasingly complicated international and domestic economic situation, China's path toward economic health is likely to be a volatile one as well.
Though its $586 billion stimulus package has been effective in the short-term, China has many crucial questions to answer:
Since Western consumption can no longer be counted on by Chinese exporters, as US Treasury Secretary Timothy Geithner pointed out Wednesday, how long will it take to shift from the export-driven model to a domestic consumption-driven economy?
Some Western governments are pressured by high unemployment to succumb to protectionism. How should China react? And with over 20 million migrant workers losing their jobs, how should China tackle its own unemployment issue while keeping the economy growing?
Above all, what is the real engine that can drive the economy in a sustainable way? How can China tackle unforeseen challenges and keep its recovery from being derailed?
Despite the uncertainties, China is cautiously optimistic about its economic future. This attitude stems from rock-solid faith in the government.
The government has stated it will deal with future economic conditions as they arise and will maintain a proactive fiscal stance and moderately loose monetary policies.
On the path to recovery, anything is possible, just as in the stock market. As Charles Plosser, president of the Federal Reserve Bank of Philadelphia, recently said, "What's most dangerous is the thing we don't know – another shock that could derail the recovery or the financial system."
The key point does not lie in believing the current recovery will put the economy back on track. Even economists cannot reach a consensus on that. What really matters is staying cautiously optimistic – this is the key to driving a bullish economic recovery.
