Changing China

Giant on the move

By George Chen
September 11, 2009

Heard any new theories about the likely shape of the global economic recovery?

At a financial forum in Hong Kong this week, Zhou Yuan, a senior executive from China Investment Corp (CIC), the $200 billion sovereign wealth fund, offered a mischievous twist on some previous formulations, as well as a nod to the importance of China in any global recovery.
In an effort to lighten the mood among a group of foreign economists, who had been arguing about whether the global recovery would be W-shaped or V-shaped, Zhou offered a perspective he said he’d heard from another source.
“Whether China’s consumers will lead the world into a more prosperous stage of economic development, I don’t know, but we certainly hear some comments to that effect,” said Zhou, CIC’s head of special investments.
“It’s clear that the economy (recovery) is something going into the V-shape,” said the English-speaking Zhou. “Someone also told me that the economic development worldwide will take the shape of”
 After a moment’s reflection, his audience understood and broke into laughter.
 Zhou explained: Since shortly after the collapse of the Wall Street bank Lehman Brothers last September, global markets have experienced volatility that has often seemed to take a “www” shape.

Now, Zhou said, we are starting to hear more and more economists talking about a V-shaped recovery, although some remain cautious because they are worried there may be a so-called “double dip” in the financial crisis, the worst since the Great Depression.
Whether it’s a V or W shaped recovery, Zhou joked, the ultimate solution to the crisis is China, eg “CN”. 
Zhou noted that China’s urbanization in the next few years — turning villages into mordern towns or farmers moving to nearby cities to become workers — will be a key attraction for foreign investments in China, which will in turn help China continue its contribution to global economic growth.
From urbanization comes consumption. And if China can produce enough consumption to help lift the global economy, may sum up the real path of this financial crisis. Or at least some Chinese bankers are banking on it.


There seems to be so much potential for a double dip recession now. The stock market ralley is based on speculation and volume has dried up; yet prices keep going higher. What gives?

There are many reasons why this we could be in for another downturn and a full out trade war between China and the US is just one reason. You might also consider the commercial real estate mortgage defaults that are looming due to increased vacancy and a high debt load or the a large drop in the US currency leading to increased prices for US consumers. There are so many reasons; I am getting nervous and considering lightening my portfolio.


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