The Chinese Economy Can it ride to the rescue of the world?

Some scary numbers The Communist Party says that growth under 8pc will not produce enough jobs to keep unemployment at a manageable level and to avoid unrest.

Why? 5 million new university students each year graduate 20 million new workers into the workforce each year

Exports fell by nearly 20pc in the first quarter. The government has poured money into the economy to keep it running. As well as a 4 trillion Yuan (£400bn) fiscal stimulus package, Chinese banks have made 4.8 trillion Yuan in new loans so far this year.

What about inflation? Goldman Sachs is predicting that consumer price inflation will be negative, at -0.3pc, this year, allowing for further cuts in interest rates and the issuing of more new money

Growth in 2010? Helen Qiao, an economist at Goldman Sachs. Thought that China’s growth next year would be 10.9pc

The bottom of the cycle Economic growth was just 6.1pc in the first quarter of this year, the lowest on record. However, commentators suggested that the figure was the bottom of the cycle,

China has problems... Paul Krugman : according to Krugman, China has now fallen into a “US dollar trap” and cannot get out of it, nor will anyone come to its rescue. China has arranged and carried out currency swaps with many countries across the globe, worth over $120 billion.

What could this mean? This strategy of using the RMB instead of the USD means that the US dollar’s domination of two-thirds of the world’s official currency reserves will begin to change.

What opportunities are there? China could use its $2 trillion reserves to seize the opportunities brought by the current financial crisis. It could offer more loans-in-exchange- for-energy-and-resources deals.