The Middle Kingdom has long been the up-and-comer among the world’s economic powers. The nation saw year after year of double-digit GDP growth, fueled by a strong manufacturing base and high demand for its relatively cheap exports. The global economic crisis has not passed over China however, and it now seems that the nation is being forced to slow its plans for growth.
In November, China saw its first decline in exports since 2001, coupled with a manufacturing growth slowdown. That same month, Beijing announced an economic stimulus plan of $586 billion, aimed at increasing domestic consumption in the wake of slumping demand from trading partners. The stock market lost an astounding 65% in 2008, crippling untold numbers of nest eggs in a country notorious for its frugality. This sort of unprecedented drop makes it seem more likely that the government’s economic stimulus will result in an upsurge of saving – not the spending Beijing is counting on. Despite this massive effort on the part of the Chinese government, I fear that cultural elements of Chinese society may make it difficult for this stimulus to have the immediate impact Beijing is looking for. As one article by BusinessWeek put it, of all the poor economic news in China lately, the biggest threat to the nation’s prosperity could be the “confidence deficit”.