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Wednesday, 29 April 2009
Chinese Economy Cannot Recover in Isolation
China cannot turn around its export-driven economy in isolation, and needs improvement in the rest of the world, especially the United States, in order to return to growth, a top Chinese official said on Tuesday.
China cannot turn around its export-driven economy in isolation, and needs improvement in the rest of the world, especially the United States, in order to return to growth, a top Chinese official said on Tuesday.
Aggressive monetary and fiscal policies put in place over the past few months are being "effective" in supporting China's economy but the "current improvement is not solid," said Chen Deming, China's minister of commerce.
"We still see some factors of instability," including the lack of a notable increase in private sector investment, Chen said in response to questions after a speech to the Chicago Council on Global Affairs.
China's central bank has slashed interest rates five times since September 2008 to the current 5.31 percent on the benchmark one-year yuan lending rate, and a major fiscal stimulus package, estimated at some $586 billion over two years, was announced in November.
Some of China's new programs are aimed at spurring domestic consumption. Still, "without the world economy, without the U.S. economy improving, it's impossible for the Chinese economy to improve on its own," Chen said. Speaking through a translator, Chen said the U.S. dollar would remain the world's major currency.
"The U.S. dollar as a main currency for international trade has many deficiencies, but the settlement of international trade will mainly be transacted in U.S. dollars," he said, without elaborating on those "deficiencies."
China in March had suggested that the U.S. dollar could be replaced as the world's major reserve currency.
"Chen's statement ... is supportive of the U.S. dollar's long-term prospects, which were debated a few months ago after an opposing suggestion made in a Chinese government report that the dollar be replaced," analysts at 4CAST Ltd in New York said in a note to clients.
The minister emphasized the need for a commitment to free trade even when economies are struggling.
"Some countries" are taking a two-faced approach to trade by decrying protectionism while at the same time instituting protectionist trade measures, he said.
For the United States in particular, "we hope that the U.S. government can tell its people that further liberalization of trade will be crucial for the restoration of the U.S. economy," he said.
"We hope the U.S. can further open its markets ... if we fend off each other's products and fight a trade way, we won't win at the end of the day."
Chen said that regulation of global financial markets ultimately needed to be strengthened in the fallout from the credit market crisis that helped trigger a global recession.
For now, though, "we need to tackle the lack of liquidity" still at work in credit markets, he said.
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Chinese Economy Cannot Recover in Isolation
Reuters
28 April 2009
China cannot turn around its export-driven economy in isolation, and needs improvement in the rest of the world, especially the United States, in order to return to growth, a top Chinese official said on Tuesday.
Aggressive monetary and fiscal policies put in place over the past few months are being "effective" in supporting China's economy but the "current improvement is not solid," said Chen Deming, China's minister of commerce.
"We still see some factors of instability," including the lack of a notable increase in private sector investment, Chen said in response to questions after a speech to the Chicago Council on Global Affairs.
China's central bank has slashed interest rates five times since September 2008 to the current 5.31 percent on the benchmark one-year yuan lending rate, and a major fiscal stimulus package, estimated at some $586 billion over two years, was announced in November.
Some of China's new programs are aimed at spurring domestic consumption. Still, "without the world economy, without the U.S. economy improving, it's impossible for the Chinese economy to improve on its own," Chen said. Speaking through a translator, Chen said the U.S. dollar would remain the world's major currency.
"The U.S. dollar as a main currency for international trade has many deficiencies, but the settlement of international trade will mainly be transacted in U.S. dollars," he said, without elaborating on those "deficiencies."
China in March had suggested that the U.S. dollar could be replaced as the world's major reserve currency.
"Chen's statement ... is supportive of the U.S. dollar's long-term prospects, which were debated a few months ago after an opposing suggestion made in a Chinese government report that the dollar be replaced," analysts at 4CAST Ltd in New York said in a note to clients.
The minister emphasized the need for a commitment to free trade even when economies are struggling.
"Some countries" are taking a two-faced approach to trade by decrying protectionism while at the same time instituting protectionist trade measures, he said.
For the United States in particular, "we hope that the U.S. government can tell its people that further liberalization of trade will be crucial for the restoration of the U.S. economy," he said.
"We hope the U.S. can further open its markets ... if we fend off each other's products and fight a trade way, we won't win at the end of the day."
Chen said that regulation of global financial markets ultimately needed to be strengthened in the fallout from the credit market crisis that helped trigger a global recession.
For now, though, "we need to tackle the lack of liquidity" still at work in credit markets, he said.
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