Asian Responses to the Global Financial Crisis

Asian Responses to the Global Financial Crisis

The Impact of Regionalism and the Role of the G20

Edited by Jehoon Park, T. J. Pempel and Geng Xiao

The expert contributors – both Asian and Western – illustrate that as G20 members, many Asian countries are now able to showcase their increasing powers and influence on global issues. Within this context, and via multidisciplinary economic and political science perspectives, the book deals with various issues such as World System analysis, the debate between the Washington Consensus and the Beijing Consensus, roles within the G20, and the contribution of ‘middle’ powers such as Korea and Australia. The application of European experiences to Asia is also considered, as are perspectives from the US. The book concludes that the key to resolving the current global economic crisis lies in how quickly a new global governance and monitoring system can be constructed, and that there are multiple roles for Asian countries to play in its development.

Chapter 5: Weathering the Financial Storms: The Government of China

Jing Ma and Lihui Tian

Subjects: asian studies, asian economics, economics and finance, asian economics, politics and public policy, international politics, international relations, urban and regional studies, regional studies

Extract

Jing Ma and Lihui Tian* 5.1 INTRODUCTION Since 1978, when the economic reforms were taken, China’s gross domestic product (GDP) has grown ten times. In 2011, the GDP of China was $8.789 trillion based on purchasing power parity, and China ranked at number two in GDP in the world, although the GDP per capita of China was $6600 which comes under the lower-middle-income group. In 2007, the growth rate of the country was as high as 13 percent. The rapidly growing economy of China is now facing certain issues which may hinder its economic growth, including the increase in unemployment, economic corruption, environmental damage, lack of arable land and a rapidly aging population. In spite of these challenges, there are severe external shocks to China’s economic development. Indeed, the global financial crisis has slowed China’s economy considerably. In the final quarter of 2008, the Chinese economy registered one of its slowest growth rates, of 6.8 percent. However, by comparing China’s GDP growth with other Asian economies, China’s economy holds up well despite being badly hit by the financial crisis. China’s impressive economic performance during the 1997 regional financial crises and the 2008 American financial storm was not achieved easily. Besides the sound fundamentals of China, we argue that the active role played by the government in managing economic activities and effective government intervention has helped China to weather the global crisis. 5.2 FREE MARKET VERSUS GOVERNMENT INTERVENTION Formulated at the time of the Latin American debt crisis in 1980s, the...

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