China fight against financial crisis

China is connected to USA: China export it's goods to USA, for this reason USA is paying dollars to them, therefore China is lending same dollars to USA and then sell their goods to USA again. That's how billion of USA dollars were circulating throw China and USA. This scheme was called ''Chimerica'' (China + America). So how this system worked until financial crisis? China was exporting cheap goods, so USA inflation was decreasing. Cheap goods encouraged to pay smaller salaries to USA employers – and again, inflation was decreasing. China wanted to sell their goods to USA, so they were lending money to USA with low interests (therefore USA was lending this money for other countries – Russia, Eastern Europe, etc.). That money was so cheap that almost everyone was able to get a loan for a house, car or even yacht. Demand in USA was growing (along with real estate prices). In other countries these cheap money were escalating prices growth and worldwide economy was rising. China – was selling and lending, USA – was buying and borrowing, other countries were also happy because they were borrowing cheap money. ''Chimerica'' guaranteed 50% of world economy growth (despite having only 25% of world popularity). A real humanity paradise?

Was it able to last lifetime? No. Why? Because cheap money created motivation to invest money into inefficient areas, into consumption, so earlier or later people would have not been able to pay their loans because they wouldn't have enough money. This bad scenario had happened to ''Chimerica''. Why this situation is painful to China? Because USA don't have that enormous demand for a cheap goods. That's why China economy growth decreased from 10-12% to 6%. Is it ok for China? No because instantly many people became unemployed and now this country suffers from social problems. Chinese save ~40% of their money for their social needs, however when they are unemployed, they stop saving money and China are now suffering from a crowd of unemployed people without any financial incomes.

So what is China plan?

People must work. China have many workforce which need to be employed.

That's why china plan – engage, engage, engage. China created 600 billion USD plan which includes new roads and railways, new bridges, wind turbines (''green'' revolution in China. Moreover they are planning to be a lead country in a wind power until year 2020), new homes for people and new public buildings (schools, libraries, etc.)

China will put additional money in economy with 2 methods: over the bigger budget expenses and with cheap bank loans. China don't have to pay back loans for Western countries so this country have a main advantage against USA, it can just lend money cheaply. How is it possible in China, when even USA don't have this advantage? Because almost all banks belong to country government (Communist Party) and party ordered to lend as much money as they can so in about 2 years they are going to lend about 300-400 billions of USD debts. To who? Usually to half-national and national companies which may not be able to return the loans. It is thought that China government would accept even 30% of ''bad loans'' because they are going to charge off these money as a loss. Don't forget that China is a socialistic country.

And how this plan is working nowadays?

Well, export have declined about 20% . This is a huge shock to economy, however domestic demand haven't declined, China even managed to assimilate billions of dollars (which were previously lent to USA). China are selling more automobiles (while USA are suffering from 40% fall in the motor industry). Even International Monetary Fund and World bank improved their economy forecasts for China from 6.5 to 7.2 gross national product (GNP) . So worldwide crisis haven't prostrate China and even let this country to get a better place in worldwide economy. Basically there are 2 mains economies in the world: USA and China. Crisis had a huge impact to Japan, Germany and European Union, however China is making progress despite having some difficulties.

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