The financial hurricane emerging from the Wall Street, in essence, is a credit crisis, which is related closely to frenzied overdrafts in the way of consumption. When the weakest link in the debt chain has finally snapped, the zeal for consumption will dampen and subside drastically.
At present, the intelligentsia in the West has begun mulling over and discussing issues on how the ongoing financial crisis will change the American-style consumption. In the meantime, we are reminded that as fewer orders have come in from clients and pressures from prices stepped up, it is more difficult for us to bring about economic growth by relying mainly on exports of key enterprises.
"Global consumption surged 63 percent between 2001and 2007, a bonanza fuelled by easy global credit conditions and soaring equity and housing prices,"indicated by statistics provided by the "Financial Times"of London. Since early 2008, however, the slump global economy has violently slashed these enterprises, and the outbreak of the current financial crisis adds to their problems as they are already deep in trouble.
The United States in recession is no longer the nation that used to go all out boldly to resort to credit for increasing consumption, and it is also sure to be the nation which does not favor "China-made"goods so much it did as before. Likewise, China's another leading trade partner, the European Union (EU), has also been in a trend of an augmented protectionism due to its own slow economic growth, an impact from the American financial hurricane and a growing deficit from its trade with China.
The thorny problem does not merely come from developed nations alone. When the economy loses strength and trade barriers heighten in these developed nations, competition between the developing countries has also turned increasingly more acute and fierce. So Danny Roderick, an ace economist at the Kennedy School, Harvard University, has pointed out that the expansion of South-South trade seems much more difficult than the expansion of North-South trade politically.
So, no one can accurately predict how long such an external economic predicament will sustain? Where is a new area of growth for global economy in months or years to come, and where lies an "engine"for fresh economic growth? These questions look quite ambiguous to date. The trend for the readjustment of global economy is however obvious and apparent and, against this backdrop, Chinese economy is bound to face a process of tough, arduous readjustment or restructuring.
In view of the overall situation in Chinese economy, it is immune to the Wall Street "virus"to some extent, as China has a limited degree of openness in its financial sector. Nevertheless, the more serious challenges ahead cannot possibly be the direct "contagion"but pressure from the transfer of its growth mode. The task we are now facing is not merely how to draw lessons but to make preparations to respond for the next step, that is, to take more initiative in readjusting (economic) setup and raise the country's domestic consumption.
When the prices of raw materials are on a steady, repid rise globally today, the endeavor to increase input in industrial sector and in equity and housing property business could possibly stimulate inflation further. Owing to the sluggish global market, more input in China's domestic production will also give rise to the glut of goods. Therefore, in order to enable the expanded domestic demand to achieve an anticipated result, it is essential and imperative to input more in such fields as social security, medicare and health work, and education.
In other words, the main purpose of imput is definitely not to turn out more goods or to build more high-rises or skyscrapers, but to bring about more and more consumers with substantial financial strength, so that ordinary citizens in the country are better able to resist and defend against risks. Such an imput will eventually effect the long-term benign growth of Chinese economy, and China will be capable of making even greater contributions to the development of the entire world.
By People's Daily Online, and its author is senior PD desk editor Ding Gang