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Warfare Impact Expected Minor on China’s Economy
The US-led military attacks in Afghanistan are expected to have a minor impact on China's economy, though their long-term influence will largely depend on the outcome of the war, according to financial experts.

"Following the rapid economic growth over the past two decades, China's economy is mainly driven by domestic demand,'' said Hai Wen, a professor with the China Center for Economic Research at Peking University, a think-tank for the nation's top decision-makers.

On Sunday, the US and Britain launched air raids and missile attacks against military and political facilities of the Taliban and the training bases of Osama bin Laden, a Saudi exile suspected of masterminding the terrorist attacks in the US on September 11.

The war could slow the world economic recovery and further hurt Chinese exports, which have been significantly reduced due to falling global demand.

In the first eight months of this year, Chinese exports were valued at US$330.5 billion, but exports in August amounted to only US$23.5 billion, a slight year-on-year rise of 0.9 per cent.

But the dwindling exports are far from a threat to the domestic economy.

"Between 1997 and 1998 when China suffered zero export growth due to the Asian Financial Crisis, the country's economy still retained a high growth rate of more than 7 per cent, and the situation could happen again,'' said Chen Bingcai, an economist with the Institute of International Economic Research under the the State Development Planning Commission.

He also predicted that China's domestic production sector and stock markets would suffer a very minor impact compared to other countries because the nation's economic system, currency exchange and stock market remain relatively closed to the world economy.

After the September 11 attacks which caused worldwide stock price falls, the Chinese market still remained stable.

The oil price fluctuations after the attack led to fears that the Chinese economy, which is becoming increasingly reliant on oil imports, would be hit.

But Chen Huai, a famous oil economist with the Development Research Center, a think-tank under the State Council, said the world oil price would not increase greatly as Afghanistan is not an oil producer.

"As the world demand for crude oil is weak, the price should not rise consistently,'' Chen told Business Weekly.

Yang Ruilong, a professor with the School of Economics at the Renmin University of China, said that the war would have a limited impact on the Chinese economy.

He said it could become an opportunity for China to raise its influence and strengthen economic links with other countries.

Hai of Peking University estimated that foreign investment in China is likely to increase because of mounting worries about instability in the United States after the attacks.

China, with the fastest period of sustained economic growth in the world, used US$27.4 billion in foreign direct investment in the first eight months of this year, an increase of 20.4 per cent from the same period last year. The figure is to grow faster with China's expected entry to the World Trade Organization later this year or early next year.

"As multinationals account for most of the investment, the rise in capital inflow accordingly represents a greater involvement of these firms in China,'' said Chen. "This will result in an upgrade in equipment, technology and economic efficiency for China.''

However, if the world economy plunges into recession as a result of the war, foreign investment may be depressed, which would have an impact on China.

"The US Federal Reserve did jump in terms of providing liquidity to the market, and there were co-coordinating efforts with the central banks of the world to make sure that there was liquidity,'' said Elaine Roche, the former chief executive of the China International Capital Corp, a joint venture between Morgan Stanley and China Construction Bank.

"But we haven't found a panic of equity selling in the market,'' she added.

In a televised address after the attack, bin Laden claimed more attacks would be launched against the US and its allies.

Yang Zhuang, an expert with the economic research center of Peking University, said that if there were more terrorist attacks in the US, consumer and investor confidence would be seriously dented and the recovery of the US economy might be delayed.

(China Daily 10/09/2001)

China Willing to Cooperate with Any Country on Anti-terrorism
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