Prepare for the worst

The nosedive that US stocks have taken should end the debate among some Chinese economists over the possibility of a second wave of global financial crisis. That debate may be theoretical, but for Chinese policymakers who have vowed to do whatever it takes to fight the crisis, the latest shock only marks the beginning of a long battle. To win that battle by turning domestic consumption into a major growth engine, they have to come up with stronger actions.

US insurer American International Group posted a staggering $62 billion loss in the fourth quarter last year, the biggest in US corporate history, and accepted an expanded bailout package from the government. That added fuel to investors' fears (read fire) over the stability of the financial system and sent US stocks hurtling down to 1997 levels on Monday.

Though the bleak global economic scenario has already made almost all governments across the world realize that the worst is not yet over, what is happening in the United States, where the crisis started, indicates that things could get worse and last longer than actually feared.