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The China house of cards - a 2009 scenario

By Arthur Thomas - posted Monday, 12 January 2009

A new economic dawn

As 2007 closed, China's growing economy appeared recession proof.

2009 heralds both harsh economic times and new opportunities for a newly evolving global economy.


The high expectations of an economic flow-on from the Beijing 2008 Olympic Games did not eventuate. As media spin doctors attempted to smother the economic failure of the Games, Nouriel Roubini's earlier predictions of a widespread recession emerged as reality, defying containment strategies and taking centre stage.

Post September 2008, China's massive foreign exchange reserves, and economic surpluses suggested a stabilising economic power that could contribute to reinvigorating the global economy.

Developed nations devised stimulus packages to resuscitate sliding economies.

The China illusion

China announced a US$586 billion stimulus package and sought direct involvement in future global economic management. China's package raised the combined total of global stimulus packages to US$2 trillion, or 2 per cent of global GDP; double that originally estimated by the IMF to overcome the looming recession.

The US$586 billion emerged as a sham intended to boost China's economic and international image. Included were projects in progress and/or allocated in earlier budgets, as well as foreign aid and loan projects. It relied heavily on local government and corporate funding. There was little "new money". Local governments denied they had the funds to meet Beijing's demands.


China's incentives to drive domestic demand to absorb massive inventories of household appliances, electronics, cars, and motorcycles to cushion the economy against sustained recession, defy reality. Domestic demand alone cannot replace the exports and foreign direct investment for China's economic survival.

China then made it very clear - China's money was for China and China alone.

Are China's numbers trustworthy?

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About the Author

Arthur Thomas is retired. He has extensive experience in the old Soviet, the new Russia, China, Central Asia and South East Asia.

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