Role of a responsible neighbor

Although it is not insulated from the global economic slowdown, China is still likely to pull out of its financial downturn faster than many other countries, thanks to timely stimulus measures and limited debt.

However, many neighboring countries have been hard hit by the ongoing economic crisis, with plunging exports, shrinking investments and heavy debts. If China's neighbors cannot ride out their economic maelstrom, it would be detrimental to China and the rest of the world.

China has always attached great importance to the development of its neighboring countries, as their stability is vital for China's fast and steady development.

When the world was grappling with terrorism a few years ago, Chinese leaders pointed out that the fundamental cause of terrorism are underdevelopment and economic backwardness. Poverty sows the seed of terrorism. Therefore, it is particularly important for China to keep a close eye on the relationship between economic development and terrorism during the current financial crisis. China should help in the development of neighboring countries as an important way to curtail the spread of terrorism.

The main destinations for China's export are advanced economies, where the current financial turmoil first erupted. The shrinking purchasing power in these countries has affected China's exports.

On the other hand, China's exports to emerging economies are increasing. If we lend a helping hand to neighboring countries in developing their economies, the expanding market in these nations can be an important base for China's exports.

Aiding neighboring countries can also lay the groundwork for the development of China itself.

China's regional imbalance in economic development has much to do with its geography. The developed coastal regions were under huge transportation pressure as their export increased. Many large-sized enterprises in China, which were transferred to inland regions during 1964-78 in line with the development strategy at the time, have good production capacity, but find it difficult to get their products to export destinations.

If we help developing nations south and southwest of China improve their infrastructure, it will be easier for Chinese exports to enter into their markets.

Thriving neighbors will also help with China's current excessive production capacity in certain industries, even though boosting domestic demand will absorb some of the overflow. Expanding investments in overseas markets is also necessary.

During the current economic crisis, many capital-strapped developing countries will find it hard to get loans for their infrastructure projects. With its colossal foreign exchange reserves and experienced engineering teams, China is capable of providing aid to foreign infrastructure programs, which will not only benefit the recipients and but also create jobs for China.

As a regional power, China shoulders the responsibility of leading other Asian countries to ride out the economic crisis.

The rapid development of the Chinese economy in the past few years has provided many opportunities for foreign enterprises. The investment of these enterprises in turn promoted China's development and foreign trade. The nation accumulated abundant foreign exchange reserves thanks to its robust exports and provided much capital to the US by buying plenty of its government treasury bonds. Unfortunately, some American politicians blamed China's "excessively" high savings rate for causing the credit bubble. It is really an unreasonable debtor.

If we invest our capital in infrastructure programs of developing countries, there will not be such blame. The World Bank's chief economist and vice president Justin Yifu Lin earlier proposed launching a new global Marshall plan, which would stimulate the economies of developing countries and help the global economy. China should support such a proposal and work closely with international financial institutions in this regard.

The author is a researcher with the State Council Development Research Center

(China Daily 04/27/2009 page2)