By Wang Ke
China.org.cn staff reporter
A UN survey says three global crises, the credit crunch, food and fuel prices, and climate change have combined to threaten development in the Asia-Pacific region.
But the survey, published by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) on March 26, says that despite the difficulties facing the region, China's GDP growth should reach 7.5 percent in 2009.
Dr. Alberto Isgut of ESCAP's Macroeconomic Policy and Development Division, said: "We are living through a period of tremendous turmoil and uncertainty. The worst financial crisis since the Great Depression, continuing food and fuel price fluctuations and looming climate change disaster have converged to pose a triple threat to development."
Dr. Isgut told China.org.cn: "Crises present an opportunity to move from resilience to resistance." He said the Chinese government and other governments in the region should focus on two issues.
Firstly, prudent macroeconomic management means the region is in a strong position to implement expansionary fiscal packages, and it should emerge as the primary source of any world economic growth that might take place in 2009.
Secondly, the costs of market failures and neglecting the traditional regulatory role of government are too high and too brutal. The crises should lead to a shift in perspective on the role of government in development.
The ESCAP survey highlights the fact that, due primarily to the performance of China and India, the Asia-Pacific region will be the engine of global growth in 2009.
According to the survey, China is now feeling the full brunt of the global recession. By November 2008, there was a 2.2 percent contraction in exports compared to the previous year – the first monthly fall in almost seven years. By January this year, the contraction had reached 17.5 percent than 2008.
The decrease in imports, from 21.3 percent in December 2008 compared to the previous year to 43.1 percent in January 2009, may reflect additional downturns in future export.
Meanwhile, China saw a rapid slowdown in inflation in the latter part of 2008, but overall inflation was still greater than 2007 at 5.9 per cent. Consumer price growth slowed in tandem with the general domestic slowdown, while prices of domestically produced goods dropped due to greater competition in the face of curtailed demand and high supply.
In 2009, China is expected to see the benefits of the unprecedented fiscal policy package – the largest in the world as a percentage of GDP – of 4 trillion yuan ($584 billion).
Mr. Wang Huijiong, of the Development Research Center of China's State Council, said the slowing of growth in China was due to a slowdown in investment in the export and real estate sectors.
He told China.org.cn: "The fall in demand in developed countries caused a rapid slowdown. But the decline started in the real estate sector."
Real-estate deceleration was triggered by government tightening of credit and other curbs on the sector in early 2008. The decrease in consumer confidence caused by the financial crisis in late 2008 led to a further contraction.
"Economic growth in 2009 will be dragged down further by the impact on the export sector of weaker overseas demand," he said.
Wang said domestic demand, supported by a looser monetary stance and public spending on infrastructure projects would provide a partial cushion.
He said that while supportive policies could help stabilize and ride out the economic downturn, the government faced a dilemma in terms of preserving a prudent and sustainable budget policy.
He told China.org.cn: "Failure to keep government budgets in check will lead to concerns about public-sector debt. Overexpansion of the public sector will also crowd out private-sector investment." "I believe the country can achieve its target of growth rate of around 8 percent this year. But China must be careful that its short term, medium term and long term growth objectives remain consistent," he said.
