The nightmare of the Lehman Brothers unleashed a flood of credit crunch on the Wall Street, and instantly cascaded into a financial turbulence sweeping across the world. With the bankruptcy of the Lehman brothers, the Wall Street financial miracle created by the once five major investment banks was shattered. Currently, Morgan and Goldman Sachs, the two narrowly escaping form a collapse, are considering shifting their business focus to the conventional banks.
How much impact would the Wall Street turmoil exert upon China, and what could be done for China to stand up to the unfolding international economic storm in its future development? The two concerns have been lingering on people's mind all these days.
With the deepening economic globalization, the Chinese economy tends to integrate more than ever into the global economy. China and the U.S are economic giants on either side of the Pacific, and the relationship of the two powerful economies is crucial to not only both countries, but to the entire world as well. Viewed from this point, the U.S-born financial crisis will inevitably deliver a harsh blow to the Chinese economy.
The impacts imposed by the Wall Street crisis upon China's economy could be divided into two categories: overt ones and covert ones. The overt impacts will be found in the following aspects: many Chinese investment institutions, especially those who invested in the U.S investment banks, would have to take heavy toll in response to the bankruptcy of the U.S investment banks. In addition, some export-oriented Chinese enterprises would face a severe shrink in their profits due to the fact that their joint venture or cooperation with the U.S businesses has been adversely infected by the financial crisis. Moreover, the faltering U.S economy induced by the Wall Street crash, to some extent, has contributed to the dwindling demand in the U.S consumer market, which also explains why China's coastal export hubs have been experiencing a sever winter in the foreign demands for the Chinese exports, and the shutdown of some export-oriented enterprises.
The covert impacts, however, would derive from the constant economic stimuli, for instance, the U.S governmental bailout plan and the impending economic recession would serve as the leading factors for the devaluation of the U.S dollar. The recalibration of foreign exchange rates would cut down china's export profits, raise its export costs, and more often than not, would cause the direct exchange loss. The Chinese economy has long counted on the three major economic drivers—investment, export and consumption, but the ongoing Wall Street crisis would dramatically press and curb these driving forces to impel the Chinese economy.
Despite this, the impacts delivered by the Wall Street crisis to China's economic growth will be limited, on grounds that China's economy is somehow insulated from the U.S economy in terms of the drivers pushing ahead with the economic growth. In the first half of 2008, China's urban and rural fixed assets investment, as well as export and consumption, was all the way on a steady rise. The GDP in the first three quarter of this year has amounted to 2.0163 billion yuan, up 9.9 percent over the same period last year.
From the perspectives of the macroeconomic operation, China's current drivers bolstering and pushing forward its economic growth remain intact and safe in essence from being infected by the Wall Street turmoil. It is expected that China's economic growth in the second half of this year will maintain a steady rate of over 9.0 percent, and a GDP growth in between 2.6 and 2.7 billion yuan will be considered achievable goals.
At present, China's economic growth is grappling with the twin pressures: difficulties from within and uncertainties from outside. After all, the U.S is an economic superpower, and the side effects brought about by the Wall Street crash would wide spread and exist for a time far beyond expectations. For China, the adoption of more flexible and cautious financial policies and the stabilization of its social and economic development must be the dual efforts it has to embark on in order to enhance its abilities of resistance on risks.
By People's Daily Online
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