As China starts to recover from the coronavirus
and the rest of the world feels the full impact
of the pandemic, Beijing is turning its attention
to the outside world, sending out masks, ventilators,
and doctors to alleviate the humanitarian crisis.
But there's another big question about China's role.
Can it help rescue the world's economy,
just as it did after the great financial crisis of 2008?
Back then Beijing launched a $590bn stimulus package
that got the Chinese economy firing again.
The demand that generated alongside US
and European stimulus efforts eventually
helped restore global economic growth.
Can China repeat that feat again?
That largely depends on two big things.
The first is how quickly its own economy can bounce back
from the huge virus-induced slump in the first quarter
of the year, and the second is the extent
to which China can act as a locomotive
for the rest of the world.
The FT has developed an index to track
the speed at which China's economic cylinders are starting
to fire again.
So far, it's showing a measured recovery.
You can see that economic activity,
which is shown by the red line, is lagging behind the grey
line, which shows GDP growth last year.
If we break out the constituents of that line,
you can see that some parts of the economy
are stirring back to life.
The amount of real estate sold, coal used in power stations,
and traffic on the streets are all showing an upward trend,
demonstrating that the economy is in recovery mode.
But other readings, such as cinema tickets sold,
container freight shipped, and the levels of pollution
in the air, remain bombed out.
Most economists are predicting that this recovery
will gain strength.
And China will experience a sharp snapback in growth
in the second quarter of this year.
Such a bounce would help generate demand
for the rest of the world too.
After all, China has accounted for around one third
of global growth in recent years.
The locomotive effect would intensify
if China also launches a stimulus package
like it did in 2009.
But most economists think that China
is neither able nor willing to launch a big bazooka again.
This is because the debts it has run up,
partly as a result of the 2009 stimulus,
preclude another credit-fueled bonanza.
Back in 2009 China's debt levels to GDP were modest.
Now they are excessive, with Chinese bank loans
equivalent to almost half of global GDP.
According to Rhodium, a consultancy, most Chinese bank
lending is used merely to cover interest payments
on existing debts.
This leaves very little spare for new investments.
All this presents Beijing with an unpalatable choice.
It could carry on with the policy of reducing indebtedness
but in doing so suffer the consequences
of an economic slowdown, or it could loose off another credit
bazooka to stimulate the economy but thereby risk burying itself
under a mountain of debt.