Is China Really Immune to the Crisis?

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.

As a result, some once-booming Chinese coastal areas now look like ghost towns, as tens of thousands of laid-off workers have packed their bags and returned to the countryside. Similarly, in Beijing’s Korean section, perhaps half of the 200,000-300,000 inhabitants – mainly workers (and their families) who are paid by Korean companies that produce goods in China for export – reportedly have gone home.