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Updated Sunday, March 15, 2009 0:52 am TWN, The China Post news staff

Defending the indefensible

It's deja vu all over again. A decade after the attack of a devastating financial storm in Asia, China is beating the drum of “Bao-ba” (defending eight) again, to hold the line of defense for a GDP growth of 8 percent in 2009. A decade ago, China was bracing itself for the worst financial hurricane in Asia. Now, the challenge is more daunting because what the nation is facing today is a more ominous and destructive global tsunami.

Last time, it was Zhu Rongji, the iron-fisted (iron-faced, too) prime minister, who led the country in the “bao-ba” battle and barely weathered the crisis. Now, it is the soft-spoken Wen Jiabao at the helm of a boat in treacherous waters. Could he succeed?

Wen, in his state of the country address to the National People's Congress which opened last week in Beijing, said he was confident the goal would be reached, with a two-pronged approach of increasing domestic demand and stimulating economic growth.

Mainland China, the world's third largest economy, was the first major country to take decisive and massive measures against the global financial crisis that broke out last September after the burst of the housing bubble in America. Beijing announced last fall a US$585 billion stimulus package — measures to increase government spending on infrastructure and social projects to create jobs and offset the weakening demand overseas. Will the stimulus plan work? Is the target of an 8 percent GDP growth attainable or realistic? China's GDP growth in 2008 was 9 percent, down from 13 percent in 2007. Is Wen Jiabao able to duplicate the success of his predecessor and former boss? Many economists around the world are skeptical, citing 6 percent growth as the more likely figure.

The pessimism is because China's phenomenal growth, which averaged 9.5 percent over the past 30 years, was driven by exports, not by domestic consumption. The breakneck growth was also fueled by foreign direct investment, which averaged US$50 billion during the past decade. If the two growth engines lost steam, the train would lose speed.

This week, Beijing's State Bureau of Statistics made public figures that only fed to the fears of a steep slowdown. Exports in February plunged 25.7 percent from a year earlier, the biggest drop in history, extending the 17.5 percent decline in January for a fourth straight month of declines. Imports dropped 24.1 percent. This dual decline has emaciated China's trade surplus, now a paltry US$4.84 billion compared with January's US$39.1 billion.

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