China's Resilence

While most of the world economies are convalescing and convulsing in intensive care with a global financial heart attack, the Chinese government’s $880 billion stimulus defibrillated the Chinese weak heart -bringing life back to the economy though not a strong “V”-shaped recovery is to be guaranteed.
The Chinese economy has already had its hard landing with China’s growth grinding to the slowest pace in a decade with Q1 growth sinking to 6.1%. China’s growth may have slowed but its growth is still on track unlike major economies in US, Europe and Japan which are contracting. Chinese economy is benefiting from the government’s aggressive monetary and fiscal stimulus. Given that most strategic sectors are centrally controlled by the government, stimulus measures should take effect more swiftly with actions taken to redirect growth towards more sustainable path of domestic demand, as well as plans to improve social safety nets such as healthcare reforms- all do bode well for the economy. The health of China’s banking system compared with the mayhem and bloodshed in key western economies helped it weather the storm. China’s banks were largely unscathed by the financial turmoil mired in complicated derivatives and toxic assets. The country’s economy had been holding up despite taking a hard hit. With the central government spending on health, education, infrastructures like roads and power grid and social safety, the stimulus being broad-based will uplift China when the high tide returns.
China still has its own risks. A major risk is the high rate of unemployment accompanied by its nascent and weak social safety regime, unrest may be brewing. While migrant worker unemployment is a pervasive problem, the leadership fears to a much greater extent the possibility of widespread student unrest leading to social problem that may destabilize the political stability.
The central government has all the economic levers at its disposal and to mobilize all its institutions - central government, local governments and the entire banking system - to boost government-influenced investments. China’s new lending surged more than sixfold from a year earlier to a record 1.89 trillion yuan ($277 billion) in March, adding to signs that growth in the world’s third-biggest economy is gathering pace though it is left to be seen how some of these allocations may be misappropriated and may lay in non-performing loans.
How these forces play out would also determine the shape of recovery in 2009-10 – that is, whether it will be a sharp, V-shaped affair, or something more drawn out.