Rebounding from Crisis: The Role and Limits of Social Policy in China’s Recovery

Abstract

The financial crisis threatened devastation on the global economic systern just as China overtook Germany to becorne the world’s third largest economy. Predictions by some that China, together with much of East Asia, was ‘decoupled’ from the global economy and would thus emerge relatively unscathed from the fall-out of financial failure in the West were swiftly proved wrong, as was the idea that China, with its vast foreign exchange reserves, could ‘bail out’ the United States (US) and other developed capitalist economies. The speed with which the crisis passed through to the real economies of China and its export-dependent neighbours quickly put an end to these speculations, but not to the recognition that China remained critical to global recovery - through facilitating credit to badly hit economies, maintaining growth, stimulating demand and contributing to macroeconomic rebalancing. How China managed its domestic economy clearly had implications that would extend well beyond its own borders.