Chinese economists and high level officials expressed their doubts about a swift Chinese recovery. Li Yang, a former adviser to the People’s Bank of China, sees the biggest challenge for China in finding a new growth engine to replace the struggling export sector. In this point Mr. Li is supported by Yao Jian, a Ministry of Commerce spokesman, who also considers stabilizing China’s export sector an “arduous task”. While stimulus spending and fixed asset investment have helped to cushion the economic slump, domestic consumption is still far from replacing the once almighty export sector as China’s engine for economic growth.
Foreign Direct Investment (FDI) in China contracted 17.8 percent to US$ 6.38 billion in May from a year earlier, marking the eight consecutive month of falling investment from abroad. Companies worldwide are still trying to cut expenses wherever possible in an effort to survive the worst economic crisis since the Great Depression. China relies heavily on FDI for its economic growth and development, with foreign-invested businesses accounting for 30 percent of industrial output, 55 percent of trade and 11 percent of urban jobs.