KEY POINTS:
China's dependence on exporting has made it vulnerable to the global economic turmoil but how much impact the credit crisis will have on it is unknown, says a leading Shanghai-based economist.
Mary Boyd, a director of the Economist Intelligence Unit, a business-to-business economic and policy research arm owned by the the Economist media group, says China has seen a drop off in exports, a weakening of its currency and fallout from investment in troubled foreign financial companies.
Many businesses are recovering from the enforced shutdown of Beijing during the Olympics and it may not be until next year that the full effects of a slow-down in US consumer spending are known.
There has been a downturn in [China's] export levels, particularly to the US. But trade within the Asia region has remained healthy.
A contraction in the level of credit it is able to access from foreign banks has meant a slowdown in car sales and construction. But Boyd said much of this was happening before the US moved to announce its bailout plans.
"The [Chinese] Government had decided to apply the brakes last year. In November last year, the message went out to foreign banks saying no more lending until next year."
Boyd said this saw the country fall back on an informal lending system between companies and because last year was an enormous year for the stock market, many were cash-rich.
That didn't stop some exporters feeling the pain and some were forced out of business, while others had to lay off staff.
Foreign-owned businesses were also questioning whether to keep their manufacturing operations in China after a raft of minimum wage increases, Boyd said.
Quotas for foreign borrowing were re-opened again earlier this year but businesses have been warned to be prudent. Boyd said many of the issues linked to the credit crunch have been worked through in China.
And unlike much of the Western world, where consumers are up to their eyeballs in debt, more than 20 years of growth have allowed the Chinese to accumulate massive levels of wealth which can now be tapped to keep their economy growing.
* Tamsyn Parker is in Shanghai courtesy of Tourism New Zealand and Air New Zealand.
