Policy Responses from Four Economies
Edited by Daigee Shaw and Bih Jane Liu
Chapter 8: China’s Policy Responses to the Global Financial Crisis
1 Yongding Yu Since undertaking reform and opening up its economy, China has experienced an economic miracle. Its average annual GDP growth rate over the past three decades has been 9.8 per cent. This unprecedented growth has vastly improved the living standards of the Chinese people. In the period 2002–07, China registered an average annual growth rate of 10.5 per cent, while the inflation rate was kept under 2 per cent. This period can be said to be the best period over the past three decades as far as macroeconomic performance is concerned. In 2007, China’s GDP growth rate was 13 per cent. In 2008 China’s GDP growth fell gradually at first; then, after the Lehman Brothers fiasco, it fell in a dramatic fashion. In the first half of 2008 China was still able to manage an annual growth rate of 10.4 per cent. In the third and fourth quarters, the rate fell to 9 per cent and 6.8 per cent respectively. In the first quarter of 2009, the growth rate fell further to 6.1 per cent. In hindsight, the turning-point in China’s growth happened in September 2008, after the Lehman Brothers bankruptcy. The monthly growth rate of industrial products is a better reflection of the changing fortunes of the Chinese economy. In August and September 2008, the growth rate of industrial products was 14.7 per cent and 11.4 per cent respectively. In October and November 2008 it dropped to 8.2 per cent and 5.4 per cent. In February...
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