Now the Games are over
This has certainly been a trying year for China - snowstorms brought much of the country to a halt at the end of January, the May12 earthquake in Sichuan took more than 70,000 lives and reconstruction in the province will take years, unrest in Tibet and Xinjiang have left the nation's western regions politically unsettled, inflation and food prices have risen steadily, stock markets slid far enough to wipe out much of the gains made in the past eight years, and food safety crises such as the recent melamine-tainted milk scandal have further shaken confidence in 'Made in China' brands.
The central government, though, must be breathing a sigh of relief that the Olympics came and went with no major catastrophes.
Many would say the Games were a resounding success. After shelling out an unprecedented official figure of US$43 billion for the Olympics - which does not account for the costs of shutting down industry in Beijing and surrounding provinces for almost two months to clear the smog from the air - anything less than perfect would have been a disaster.
While the doom-and-gloom prognostications about China 'cracking' following the Olympics may be an exaggeration, the country does have major issues to tackle in coming years.
The balancing act to address environmental problems, further political reform, unforeseen natural disasters, social unrest and economic progress along with managing international and regional relations will be a difficult task.
As long as the economy remains strong, balancing all these issues will not be too strenuous. Even though the stock market has contracted in the mainland for the past year, other macroeconomic indicators are stable.
The economy grew at an annual rate of 10 per cent for the first six months, and tax revenue by about 31 per cent to help fill government coffers. Growth of exports and imports remains robust.
Inflationary pressure, after surging for months, eased down to 4.9 per cent in August, the first time it had dropped in 14 months. This led the central bank to cut the interest rate on one-year yuan-denominated loans by 0.27 per cent and the reserve requirement ratio by 1 percentage point from September 25, to help stimulate growth. In another recent move, China's sovereign wealth fund, China Investment Corporation, bought stakes in three of the country's biggest state-owned banks to allay investor fears during the global credit crisis.
'Long-term prospects for the Chinese economy still remain good,' said James Macdonald, senior manager at Savills research (China) department. 'And, while there may be some adjustments in the short term as a result [of] the worsening global economic climate, China, although not decoupled from the global economy, continues to show some of the better prospects on offer at the moment.'
According to the Financial Times, the Olympics may have clouded the short-term analysis of the Chinese economy, making it difficult to forecast what lies in store for a post-Olympic economy.
The economy had already been slowing with gross domestic product in the final quarter of last year at 11.9 per cent, followed by 10.6 per cent in the first quarter of this year and 10.1 per cent in the second quarter.
The Economist Intelligence Unit forecast China's economic growth to level out at 9.8 per cent for this year.
'This may well carry on into 2009 and, depending on how proactive the Chinese government is and how long the global economy takes to stabilise, we could see the market start to pick up in the second half of next year,' Mr Macdonald said.
A recent UBS paper said there would probably be a slowdown in the economy, but that it would not be 'directly related' to the Beijing Olympics.
'With the current macro environment and with projects such as the Sichuan earthquake reconstruction and the development of alternative energy sources, infrastructure investment growth is likely to rebound in 2009,' UBS analysts reported.
International property consultant Knight Frank said a post-Olympic economic slump spurred by a downturn was unlikely. Nick Jones, executive director of Knight Frank's Beijing office, said: 'Beijing has taken specific measures to guard against a post-Olympic bust.'
Josephine Sye, marketing manager at China Properties Group, said: 'The global economy faces a considerably more challenging environment over the next 12 months than in the past few years.
At this stage the conservative consensus holds that output in Asia will continue to expand moderately this year and China will continue to outperform by a significant margin.'
A crucial time for decisions about the direction of the country will come following the week-long National Day holiday starting today, when the third plenary session of the CCP Central Committee meets in Beijing.
Economic policies surrounding the plunging stock market and dropping real estate values will surely take centre stage.
