The Chinese EconomyThe Chinese Economy

Can it ride to the rescue of the Can it ride to the rescue of the world?world?

Some scary numbersSome scary numbers

The Communist Party says that The Communist Party says that growth under 8pc will not produce growth under 8pc will not produce

enough jobs to keep unemployment enough jobs to keep unemployment at a manageable level and to avoid at a manageable level and to avoid

unrest. unrest.

Why?Why?5 million new university students 5 million new university students

each year graduateeach year graduate20 million new workers into the 20 million new workers into the

workforce each yearworkforce each year

Exports fell by nearly 20pc in the first Exports fell by nearly 20pc in the first quarter.quarter.

The government has poured money The government has poured money into the economy to keep it running. into the economy to keep it running. As well as a 4 trillion Yuan (£400bn) As well as a 4 trillion Yuan (£400bn)

fiscal stimulus package, Chinese fiscal stimulus package, Chinese banks have made 4.8 trillion Yuan in banks have made 4.8 trillion Yuan in

new loans so far this year.new loans so far this year.

What about inflation?What about inflation?

Goldman Sachs is predicting that Goldman Sachs is predicting that consumer price inflation will be consumer price inflation will be

negative, at -0.3pc, this year, negative, at -0.3pc, this year, allowing for further cuts in interest allowing for further cuts in interest rates and the issuing of more new rates and the issuing of more new

moneymoney

Growth in 2010?Growth in 2010?

Helen Qiao, an economist at Goldman Helen Qiao, an economist at Goldman Sachs. Thought that China’s growth Sachs. Thought that China’s growth

next year would be 10.9pcnext year would be 10.9pc

The bottom of the cycleThe bottom of the cycle

Economic growth was just 6.1pc in Economic growth was just 6.1pc in the first quarter of this year, the the first quarter of this year, the

lowest on record. However, lowest on record. However, commentators suggested that the commentators suggested that the figure was the bottom of the cycle,figure was the bottom of the cycle,

China has problems...China has problems...Paul Krugman : according to Krugman, Paul Krugman : according to Krugman,

China has now fallen into a “US dollar China has now fallen into a “US dollar trap” and cannot get out of it, nor trap” and cannot get out of it, nor

will anyone come to its rescue. will anyone come to its rescue. China has arranged and carried out China has arranged and carried out currency swaps with many countries currency swaps with many countries

across the globe, worth over $120 across the globe, worth over $120 billion.billion.

What could this mean?What could this mean?

This strategy of using the RMB This strategy of using the RMB instead of the USD means that the instead of the USD means that the

US dollar’s domination of two-thirds US dollar’s domination of two-thirds of the world’s official currency of the world’s official currency reserves will begin to change.reserves will begin to change.

What opportunities are there?What opportunities are there?

China could use its $2 trillion reserves China could use its $2 trillion reserves to seize the opportunities brought by to seize the opportunities brought by

the current financial crisis.the current financial crisis.It could offer more loans-in-exchange-It could offer more loans-in-exchange-

for-energy-and-resources deals. for-energy-and-resources deals.