'Buy China' withers global hopes

The Asian market won't close the gap. Much of the region's internal trade involves intermediate goods used in the production of other products — many of which go to the U.S. and Europe. A world without growth will force Asia to retool economies toward greater domestic consumption without the cushion of robust demand.

What's more likely is an inward-looking period as opposed to regional cooperation. Groups such as the Association of Southeast Asian Nations talk a lot about linking their combined fortunes and outlooks. Meetings, photo opportunities and communiques don't hide the stark reality that Asian economies compete more with each other than join hands.

China has been expanding efforts to help exporters with bigger tax benefits, loans from state-owned banks and other steps. Many “Buy China” directives are coming from Beijing. And don't expect China to allow the yuan to appreciate much in the second half of 2009, regardless of market pressures.

Such policies suggest China is losing confidence in its 4 trillion-yuan (US$585 billion) stimulus plan. They are also a reminder of the limits to governments' ability to boost growth with public largess alone.

Growth may slip as stimulus spending wanes amid political opposition to a widening fiscal deficit, says Ma Jun, Deutsche Bank AG's Hong Kong-based China economist. That casts doubts on predictions that Chinese gross domestic product will expand 8 percent in 2010.

The omnipotent reputation many assign to leaders in Beijing is being challenged. Take this week's Internet fiasco. China postponed the deadline for personal-computer makers to include state-backed anti-pornography software on new PCs after U.S. officials and business groups urged it to scrap the rule.

China is normally a model of implementation. The speed with which it builds state-of-the-art airports, high-speed rail lines and Olympic stadiums is impressive by any scale. Its censorship efforts were exactly the opposite: sloppy and ill-considered.

Economic-stimulus efforts appear to be benefiting from greater competence. That may be a boon for 1.3 billion Chinese trying to get a share of the nation's growth. The benefits for those outside China are much more limited.

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