China key to easing global recession

By Fu Jing (China Daily)
Updated: 2009-01-17 08:19

The United Nations is counting on China as Asia's "locomotive" for global economic growth, it said in a high-level report released on Friday.

In the World Economic Situation and Prospects 2009, UN experts forecast China will achieve between 7 and 8.9 percent growth this year, with the most likely figure being 8.4 percent.

In contrast, the global economy is forecast to grow by just 1 percent, down from 2.5 percent last year.

The UN report, jointly prepared by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development and five regional commissions, said China contributed about 22 percent to the world's economic growth last year, and the figure is set to grow this year.

Commenting on the report to China Daily, Wang Tongsan, an economist with the Chinese Academy of Social Sciences, said: "It is beyond doubt that China will play a more important role in the world economy as the US and Japan experience setbacks."

The US economy is expected to slide 1 percent this year, while Japan's is forecast to drop by about 0.3 percent, he said.

So this year will see China making an "increased contribution to the world", Wang said.

The UN report also forecasts a continuing deceleration of economic activity in East Asia, with regional GDP growth expected to drop to 6 percent this year, down from 6.9 percent last year and 9 percent in 2007.

Weakened trade with Europe and the United States will curtail growth in most economies in Asia, including China, it said.

However, with $1.95 trillion in foreign exchange reserves and a balanced government budget, the UN report said that China still has room to adopt more expansionary fiscal policies.

China has already announced a $586 billion stimulus package (equivalent to 15 percent of the country's GDP) to boost its growth, the report said.

Premier Wen Jiabao told the media recently that further government spending was planned.

In contrast, the stimulus packages launched in some developed countries are too small, the report said.

"Governments are hesitant to move too quickly on such stimulus packages, fearing possible negative repercussions in the medium term," it said.

While the need for international policy coordination and cooperation is more pressing than ever, the UN said there is "no credible, institutionalized mechanism for international coordination of stimulus packages or monetary policies".

The IMF and World Bank should take the lead roles in enhancing international policy coordination, as well as in the participation of emerging and developing countries, it said.

"That is in line with the stance of the Chinese government," Zhu Baoliang, an economist with the State Information Center, said.