China and the Global Financial Crisis
China and the Global Financial Crisis

Summary/Abstract: This paper examines the effects of the global financial crisis of 2008-09 from a Chinese standpoint. It was primarily a crisis of the developed world that eventually engulfed the entire world, and through a mixture of monetary and fiscal measures supported by a stimulus program, China has weathered its adverse effects relatively well. It is important to note, however, that before the crisis China’s economy was already nearing crossroads in the sense that its growth model based on export oriented low-cost manufacturing and investment in heavy industry and infrastructure, was giving signs of exhaustion. This paper utilizes macroeconomic analysis to elucidate the vulnerabilities of the Chinese growth model and outline China’s crisis response measures, which provided a remedy in the short term, and also, and more importantly, opened an opportunity window to address its structural shortcomings in the long term and to embark on a new and sustainable path of economic growth, which requires greater emphasis on domestic consumption.

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