As if it were needed, Beijing served notice last week that despite the worldwide credit crunch, or perhaps because of it, China is still the most important economy on earth.No sooner did reports flicker across traders' computer screens last Thursday about how China would soon unveil a new stimulus package than global stock and commodities markets sprang to life. The rebound was led by mining and resource companies such as Australia's Rio Tinto, which happens to be on the receiving end of a US$19.5 billion (Dh71.62bn) equity investment from China's largest aluminium producer.
As it turned out, the official at the centre of those reports, Wen Jiabao, the Chinese premier, insisted he was misquoted and share prices resumed their grim slide the next day. But the point was lost on no one: the world may catch a cold when the US sneezes, but the potion for recovery is in Beijing, not Washington. Given the rate at which Barack Obama, the US president, is cutting promissory notes to global investors - which many economists agree is the only way out of the hole dug for him by his predecessor - the US is on its way to becoming one of the world's most indebted economies as well as its largest. As America's primary lender with more than $2 trillion in foreign reserves, China is doing more to keep the US economy alive than any other creditor nation.
And its government is taking heat for it. The backdrop to Beijing's rubber-stamp National People's Congress (NPC), which started its annual meeting last week and concludes this Friday, is the growing demand among many Chinese - from industrialists to bankers to jobless migrant workers - that financial Mandarins such as Mr Wen transfer some of the country's foreign exchange riches out of low-yielding dollar-denominated accounts and convert them into local currency so they can be invested at home.
This is unlikely to happen any time soon. True, economic planners around the world are hoping China will double up on the 4 trillion yuan (Dh2.14tn) stimulus package it announced in November, just as Standard Chartered Bank suggested it might do in a report issued last week. But they'd prefer it be financed from Beijing's national account and not from its war chest of foreign reserves. The moment word leaks out that China is dumping $1tn in greenbacks for yuan or perhaps another currency that offers better returns, the stimulus bill Mr Obama laboured so mightily last month to push through Congress won't be worth yesterday's dim sum. Nor is the Chinese government eager to do anything that would sharply depreciate the value of their hard-won hard currency.
Fortunately, China has room to manoeuvre. Retail sales are high and lending is on the rise. At the NPC, Mr Wen and other senior officials have been projecting confidence that China would manage growth of more than 8 per cent amid signs that the economy is responding to the spending package despite plummeting export sales. (Some economists fear, however, that Beijing is trying to deflect the growing chorus of criticism with happy talk while providing few details about how funds from the stimulus package are to be spent.)
That said, the global economic crisis is taking a huge toll on China's export-led economy. An estimated 20 million to 40 million migrant labourers, part of an army of workers who over the last generation has flocked to the country's urban areas in search of jobs, are now unemployed and heading home. Even worse, some 1.6 million college graduates are spilling into a stagnant job market. The worst fear of all Chinese leaders - thousands of people on a train heading for nowhere - is perilously close to being realised. Add to that the kind of disgruntled students who formed the core of the pro-democracy movement that led to the 1989 Tiananmen Square massacre, and you have the trace elements for conflagration.
"There is fuel there," said Charles Freeman, a China expert at the Centre for Strategic and International Studies in Washington. "Traditionally, the biggest source of concern for the leadership is a group of students that is politically dissatisfied, particularly if they ally with migrants."Last week, Robert Zoellick, the president of the World Bank and one of the smartest people in Washington, referred to the US and Chinese economies as "the G-2". Without healthy US-China commercial ties, he argued in a column he co-wrote for The Washington Post with Justin Yifu Lin, the bank's chief economist, "the Group of 20 will disappoint". Mr Zoellick is right. Given America's critical dependence on Beijing as the very lifeline of its economy, it is also fair to say that within this exclusive group, China is first among equals.