China and the Global Financial Crisis
China and the Global Financial Crisis: Implications for the United States
Wayne M. Morrison Specialist in Asian Trade and Finance June 3, 2009
Congressional Research Service 7-5700 www.crs.gov RS22984
CRS Report for Congress
Prepared for Members and Committees of Congress
China and the Global Financial Crisis: Implications for the United States
Summary
Over the past several years, China has enjoyed one of the world’s fastest growing economies and has been a major contributor to world economic growth. However, the current global financial crisis threatens to significantly slow China’s economy. Several Chinese industries, particularly the export sector, have been hit hard by crisis, and millions of workers have reportedly been laid off. This situation is of great concern to the Chinese government, which views rapid economic growth as critical to maintaining social stability. China is a major economic power and holds huge amounts of foreign exchange reserves, and thus its policies could have a major impact on the global economy. For example, the Chinese government in November 2008 announced plans to implement a $586 billion package to help stimulate the domestic economy. If successful, this plan could also boost Chinese demand for imports. In addition, in an effort to help stabilize the U.S. economy, China might boost its holdings of U.S. Treasury securities, which would help fund the Federal Government’s borrowing needs to purchase troubled U.S. assets and to finance economic stimulus packages. However, some U.S. policymakers have expressed concerns over the potential political and economic implications of China’s large and growing holdings of U.S. Government debt securities. This report will be updated as events warrant.
Congressional Research Service
China and the Global Financial Crisis: Implications for the United States
Contents
China’s Stake in the Current Crisis
Wayne M. Morrison Specialist in Asian Trade and Finance June 3, 2009
Congressional Research Service 7-5700 www.crs.gov RS22984
CRS Report for Congress
Prepared for Members and Committees of Congress
China and the Global Financial Crisis: Implications for the United States
Summary
Over the past several years, China has enjoyed one of the world’s fastest growing economies and has been a major contributor to world economic growth. However, the current global financial crisis threatens to significantly slow China’s economy. Several Chinese industries, particularly the export sector, have been hit hard by crisis, and millions of workers have reportedly been laid off. This situation is of great concern to the Chinese government, which views rapid economic growth as critical to maintaining social stability. China is a major economic power and holds huge amounts of foreign exchange reserves, and thus its policies could have a major impact on the global economy. For example, the Chinese government in November 2008 announced plans to implement a $586 billion package to help stimulate the domestic economy. If successful, this plan could also boost Chinese demand for imports. In addition, in an effort to help stabilize the U.S. economy, China might boost its holdings of U.S. Treasury securities, which would help fund the Federal Government’s borrowing needs to purchase troubled U.S. assets and to finance economic stimulus packages. However, some U.S. policymakers have expressed concerns over the potential political and economic implications of China’s large and growing holdings of U.S. Government debt securities. This report will be updated as events warrant.
Congressional Research Service
China and the Global Financial Crisis: Implications for the United States
Contents
China’s Stake in the Current Crisis