Ken Livingstone has been invited by the government of Hong Kong to advise it on environmental policy and the Mayor of Shanghai to visit the city this weekend - hence the delays in posting on SEB.
The world economic situation seems very different from here. Hong Kong banks are concerned about the financial situation. But in Shanghai there is no concern about mainland China's banks, which had almost no exposure to the toxic derivative products which brought down Lehman Brothers, Bear Sterns and other US and European banks. The issue dominating discussion here is the effects on the real economy. The rapid turn down in the international economy can affect China's exports, as can the fact that China's currency is stable against the dollar when almost all other currencies are falling against it.
The solution is a specifically Chinese form of Keynesianism which can be used to boost the domestic economy. China is using classical Keynesian methods of reduction of interest rates and increased state spending. But it also has one very powerful tool not available in the US or Europe.
Due to the very large state company sector China can directly boost investment - it does not have to rely only on indirect methods. There is no risk, to use Keynes famous analogy, of the government merely 'pushing on a piece of string.' China, through its state owned company sector, has direct methods to avoid the decline in investment which is the driving force of a classic Western recession. Far from the state sector being a hindrance for the the economy it permits macro-economic regulation to take place far more strongly than in the US or Europe.
Chinese Keynesianism has far more powerful tools at its disposal than Keynesianism in the UK, US or Europe.
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