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China's Main Concern at G-20 is Domestic


When leaders of the world's richest nations and biggest emerging economies meet for the G-20 summit in Washington, much of the attention will be on what actions China can take to help resolve the global financial crisis. China's resilient growth has bolstered world trade, but as Daniel Schearf reports from Beijing, China's main economic concerns are domestic.

China is a world growth leader. Its cheap, manufactured exports power economies around the globe.

This means, though, China is not immune to the global economic malaise. Chinese exports have slowed and its bull market dropped sharply in the wake of the credit crisis in the United States.

Pan Jingliu pulled out of the stock market before it fell, but says many of his friends lost money. "One has to pay attention to the 'Big Boss,' - in other words, the government," Jingliu said. "One should know the government's economic policy from top to bottom, understand it, and be familiar with it. If you do not understand the government's intentions you can make mistakes."

The government bought up stocks and lowered trading taxes to boost the market, but trading remains volatile.

Just ahead of the G-20 meeting, China also lowered interest rates and announced a $586 billion spending package on infrastructure, social services and tax rebates.

The world is now waiting to see whether Beijing's actions will help restore global economic stability.

"China has the most foreign currency reserves in the world and the second most U.S. bonds after Japan," said Li Wan-Yong, a researcher on economics at South Korea's Hyundai Research Institute. "In terms of those, China can play an important role to overcome the global economic crisis and the Asian economic crisis."

China's Vice Foreign Minister He Yafei says China can best help the world economy by stabilizing its own. "China's economy makes up a large part of the world economy," he said. "Whether or not China's economy is able to maintain stability and continue growing, whether or not China's domestic economy is stable, is very important not only to China's but also to the world's economy."

Analysts say the government spending package will to some degree help exporters, but is mainly aimed at increasing domestic consumption.

"This is a leadership, after all, that is composed, the better ones, of engineers," said Bill McCahill, who is with China-based research firm J. L. McGregor and Company. "These are not people who are terribly outward looking and outward focused. They get up in the morning wondering how they're going to take care of 1.4 or 1.5 billion people in their home country, not homeowners in Los Angeles."

Slowing demand from the US and other countries has forced thousands of Chinese factories to close and raised fears of unrest as millions are expected to lose their jobs.

Chinese officials warn exports will continue to suffer because of the global slump, indicating the worst may be yet to come.

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