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G20 summit's plan deemed to up demand for Chinese goods

ECONOMISTS said China will benefit significantly from measures agreed at the London Group of 20 summit, which will boost external demand for Chinese goods.

The leaders of the G20 economies agreed at last week's London summit to triple International Monetary Fund resources to US$750 billion.

Economists said the agreement is a big 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, the agreement to make US$250 billion in trade financing via the World Bank and other institutions, can also help propel China's exports.

"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.

Major boost

Green said the 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.

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

China's purchasing managers' index in March rose for the first time in six months, indicating a recovery in the manufacturing industry and also the likelihood that China's economy has bottomed out. Though the March index was driven mostly by new domestic orders, the contraction in export 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 noted that a sustained rebound in China's economic growth would depend on a recovery in global demand.

"Hopes are on a solid recovery to begin in 2010," said Sherman Chan, a Moody's economist.


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