BEIJING – After 10 years of double-digit economic growth, China now finds itself mired in the global recession, its factories hard-hit by declining demand for Chinese-made goods.
The economy was at the very top of the agenda when the People's Congress held its annual meeting in Beijing earlier this month. Addressing the gathered delegates and speaking to a nationwide audience, Premiere Wen Jiabao said, "This year our government work will give high priority to dealing with the global financial crisis and promoting steady and rapid economic growth."
Like the United States, China has announced an ambitious stimulus package estimated at $585 billion, the focus of which will be social services and infrastructure. High-speed railways will be built, along with highways and housing, creating jobs and boosting the economy.
Health care, a primary concern of Chinese citizens, will also be expanded under a universal program designed to provide medical benefits to all. With some $2 trillion in reserves, the communist government is well positioned to weather the financial storm.
But an economics professor at Tsinghua University believes there are troubling signs the crisis will get worse.
"What is making things extremely difficult is for the first time more of these small- and medium-sized enterprises are closing their doors than being created," Wang Yi Jiang said — and that means the economy isn't growing.
Part of China's response is to stimulate domestic consumption, reducing the country's dependence on exports. But spending runs counter to what most Chinese people believe. China is a country of savers where most people try to put away at least 25 percent of their annual pay. Most people pay for things the old fashioned way — with cash. Only about one in 10 has a credit card.
During a trip to China last year, before the recession took hold, FOX News spoke with an economics professor and asked him what problems he saw when he looked in our direction. "People in your country too frequently rely on their credit cards," he said. Unlike Americans, Chinese people have very little personal debt and that might help see China through the global crisis.
In China it's often hard to get a good sense of just how the economy is doing. Company after company tries to paint a rosy picture of its finances, but the decline of the dollar and the British pound are certainly impacting travel and tourism.
"Fluctuation in the exchange rate is also playing a very important role that makes China quite an expensive destination," said Tong Wei of the China International Travel Service.
It also makes China a more expensive place to do business. At fire alarm manufacturer Beijing Leader on the outskirts of the capital, the assembly line is in full swing with young workers assembling smoke detectors. The company sells primarily to European countries and reports export demand has been reduced, but domestic sales are up. That's good news for Beijing Leader, but with demand declining it will be a difficult task to make this a profitable year in the country known as the world's factory.
FOX News producer Andrew Fone just returned from two weeks in China where he traveled the country to get a sense of how the Chinese economy is doing during the financial crisis.