China May Be First Major Economy to Recover
As China’s $585 billion stimulus package begins to take effect, the third-biggest economy is showing some signs of recovery. According to recent estimates, China’s economy could expand 6.6% in the second quarter after slowing to 6.3% in the three months to March 31, reports Bloomberg.
Like most other major economies, China has been battling high unemployment, flagging exports, and a slowed housing market, although it is one of only three large economies still growing. The stimulus, however, which has increased spending on roads, railways, housing, and loans, has acted as further riprap to shore up the Chinese economy. Lu Ting, a Merrill Lynch economist in Hong Kong, told Bloomberg, “China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008.”
Lu added that China has the resources that it needs to maintain growth even if the rest of the world takes longer to show the same signs of recovery. The country’s low public debt of only 18.5% of its GDP, $1.95 trillion in forex reserves, and balanced budget put it in a good position to weather the storm. Although the Chinese government recently faced criticism from Treasury Secretary Geithner over perceived manipulation of the yuan in currency trading, Lu maintained, “China has perhaps the deepest pockets in the world. It can relentlessly ramp up spending to create jobs and meet its growth target.”