Stronger China

The Economist: Stronger China

Thanks to China, an American recession need not cause the whole world to crash.

ECONOMISTS have long warned that the world economy could not fly for ever on the single engine of American demand. A one-engined plane is more likely to crash. With its housing market blighted and its consumers growing fearful, America now faces a mounting risk of recession. The good news, however, is that the world has found some powerful new engines in China and other emerging economies. Even as credit markets seize up, a world economy that is less dependent on the United States is more likely to stay aloft.

The power of this new motor is startling. For several years, emerging Asian economies have accounted for more of global GDP growth than America has. This year China alone will for the first time accomplish the same feat all on its own (at market exchange rates), even if American growth holds up. American consumer spending is roughly four times the size of China's and India's combined, but what matters for global growth is the extra dollars of spending generated each year. In the first half of 2007 the increase in consumer spending (in actual dollar terms) in China and India together contributed more to global GDP growth than the increase in America did. …