CHINA’S GROWTH RECESSION &POLICY RESPONSE

April 6, 2009 at 2:00 pm

Global demand for manufactured goods has fallen in the wake of the world-wide financial crisis and ensuing G-7 consumption slowdown. This drop in demand has pushed China’s economy to the brink of a “growth recession” –conventionally defined as a period of weak economic growth and rising unemployment.

To combat this, China’s government has utilized a combination of policy tools aimed at:
• Fiscal: Promoting domestic investment through public infrastructure development;
• Monetary: Loosening credit, particularly to state-owned enterprises; and
• Other: Extending export rebates and incentivizing real estate transactions.

There are several indications of an economic slowdown in China (see figures below). Recent reports of
labor market penetration problems and plant closings in thousands of textile, apparel, hardware, and
electronics firms, suggest that urban unemployment may rise above last official estimates of 4.2% (USITC Executive Briefings on Trade March 2009, A. Hammer, Office of Economics)

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Entry filed under: Asia, China, Global Business, Reports.

China: Exploring the Possibilities East Asia & Pacific Update – Battling the forces of global recession


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