Is China Really Immune to the Crisis?

Addressing the annual World Economic Forum in Davos, Switzerland, Chinese Premier Wen Jiabao all but guaranteed that China’s annual growth would remain above 8% in 2009. Wen’s words were like warm milk to the recession-numbed audience, but it is far from obvious that China's government really has the tools needed to ensure the economy's resilience.

CAMBRIDGE – Addressing the annual World Economic Forum in Davos, Switzerland, Chinese Premier Wen Jiabao explained his government’s plans to counter the global economic meltdown with public spending and loans. He all but guaranteed that China’s annual growth would remain above 8% in 2009. Wen’s words were like warm milk to the recession-numbed audience of global political and business leaders.

But does the Chinese government really have the tools needed to keep its economy so resilient? Perhaps, but it is far from obvious.

America’s deepening recession is slamming China’s export sector, just as it has everywhere else in Asia. The immediate problem is a credit crunch not so much in China as in the United States and Europe, where many small and medium-size importers cannot get the trade credits they need to buy inventory from abroad.

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