Have China internal conditions to surpass the external contraction?
CG: No. Consumer sentiment in China is bearish and appears to be getting worse. Consumer spending as a percentage of the economy, now about 35 percent, has been shrinking in the last few decades. The steps Beijing is taking to boost the economy, like export incentives and currency manipulation, tend to depress consumption. The new stimulus program heavily favors infrastructure, not social services, and will only have a delayed effect on consumers. In any event, it takes years and decades to reorient an economy away from exports and investment to consumption. Eventually China will have a consumer economy, but it will not have one in time to pull China out of the current downturn. Q: Economist Li Yang, from the Chinese Academy of Social Sciences, said that the stimulus package of 4 trillion yuan renminbi (US$ 586 b) will permit the uptrend in the second semester of 2009. Do you think this “political” forecast worth credit? GC: Obviously, spending 4 trillion will have some positive effect
