Its restaurants are full, its airplanes are packed and its always volatile stock market is looking remarkably steady. While much of the world skids toward economic recession, China is showing off to the world the upside of a still largely closed and tightly controlled economy.
That economy -- the GDP already ranks sixth in the world, according to the World Bank -- is on track to expand by more than 7 percent this year and is not likely to slow much next year. In contrast, the US, Japan and Europe are expected to experience this year their first collective contraction since the oil price shock of the mid-1970s, with little likelihood of a recovery before the second half of next year.
China has been able to defy economic gravity thanks largely to two phenomena: foreign exchange controls that prevent money pumped into the economy from leaking out, and the benefit of a continental economy with a consumer market big enough to potentially drive growth on its own.
A far bigger challenge to China than a global slowdown is the country's membership in the WTO, which took effect last Tuesday. Trade barriers will begin to fall next year, setting off a multinational rush to grab a piece of China's promising market of 1.3 billion people.
That is expected to send the country's imports surging, surpassing the growth of its exports and eroding the country's enviable trade surplus, which widened to US$3.9 billion in October, bringing its 10-month trade surplus to US$17.3 billion.
Yet, while WTO membership will widen access to its market, the country is certain to guard its economy and find ways to protect domestic sectors whose survival is threatened by foreign competition.
The country's export growth will most certainly take a hit from a drop in consumer spending in the US, Chinese government economists say. But China's export growth was already shrinking before the Sept. 11 attacks, and exports to the US, its second-largest trading partner after Japan, account for only about 9 percent of China's GDP. Other big trading partners include the EU and Southeast Asia. Trade is growing, but the rate is slowing.
China has been deliberately weaning its economy off what had been a growing dependence on exports ever since the Asian export glut of the late 1990s crippled other export-dependent economies in the region. Last year exports totaled US$249.21 billion, the Chinese government reported, or nearly a quarter of its US$1.077 trillion GDP. Economists inside and outside China predict that export growth will drop to around 5 percent this year, down from 28 percent last year.
In 1998, Beijing began spending heavily to keep economic growth from shrinking as economies around Asia tipped into recession. It has not stopped: this year, even more government spending will pour into public work projects, like roads, dams and high-voltage electrical lines that will light previously darkened villages.
"Multinational corporations are consolidating their operations at home and moving to China," said Andy Xie, an economist at Morgan Stanley in Hong Kong. "Sept. 11 accelerates this trend."
Motorola said it will invest US$6.6 billion in China in the next five years at a time when demand for telecommunications gear in Europe and the US has slackened. Ericsson of Sweden said that it would create thousands of jobs in China and triple exports from the country by 2005, even as it trims jobs elsewhere.
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