How successful was China’s stimulus package in response to the global financial crisis?
How strong is the Chinese economy? The question is what was the purpose of the stimulus package in response to the crisis of 2007 and 2008. There is a long-term view and a short-term view. If your number one concern is to rebalance the economy away from excessive reliance on investment and net exports, then the fiscal stimulus package didn’t work. What it did was it took China from having the highest investment rate—probably in recorded history—and significantly increased it. It increased the importance of investment in China and it increased the probability that a lot of this investment wasn’t economically viable. What didn’t go into infrastructure investment went into expanding capacity in a world that doesn’t really need more capacity, it needs less capacity. So it went into expanding shipbuilding, steel production, chemicals, etc. So from that point of view it hasn’t been very successful. Especially if you consider that there may be a significant increase in non-performing loans an
