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G20 summit a boost for China's economy

ECONOMISTS say China will benefit significantly from the London G20 summit's measures with a boost to its external demand to help China step out of the slowdown sooner.

The group of 20 major economies agreed at last week's London summit to treble the International Monetary Fund resources to US$750 billion.

Economist said it is a major indirect win for China as it means more money is available to stabilize large emerging markets like Mexico and Eastern Europe.

"It is good for China's exporters, as developing countries have become increasingly important export markets for China," said Stephen Green, research head of Standard Chartered Bank in China.

Another G20 measure, an agreement to make US$250 billion in trade financing via the World Bank and other institutions, could also help China's exports.

"These measures should result in a significant stabilization of external demand much sooner than would have been the case otherwise, and therefore offer a major boost to China's growth prospects," Green said.

"The results of the G20 meetings may ease financing conditions for China's trading partners, thereby reviving some trade activity previously held back by insufficient financing," said Ken Peng, a Citibank economist in Shanghai.

About 30 percent of China's economic growth has been driven by external demand. China has launched a 4-trillion-yuan (US$586 billion) stimulus package to arrest the economic slowdown.

China's March purchasing managers' index moved into expansionary territory for the first time in six months, indicating the recovery of the manufacturing industry and the possibility that China's economy has bottomed out.

Though the March index was driven mostly by new domestic orders, contraction on exports orders also moderated.

"Now, more than ever, wins for the global economy are wins for China, and their mutual dependence has never been clearer," Green said.

Meanwhile, economists also say that a sustained rebound of China's economy growth will rely on recovering global demand.

"Hopes should be for a solid recovery to begin in 2010," said Sherman Chan, a Moody's economist.

The World Bank and IMF both predict a globe recession this year, the first decrease since World War II.

The G20 gathering that reached common ground on battling the global crisis was an important step to turning the picture around for the global economy, Chan said.


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