One of the lessons China learned from the 1997 Asian Financial Crisis was that while isolation from world markets can slow growth, it also protects the economy from international crises.

While in practice preventing the movement of currency in and out of China has been a headache over the past 10 years, it has in the past year paid off. The global financial crisis is spreading from one country to another, leaving the rubble of former financial megaliths in its wake. But China’s financial system has, so far, emerged relatively unscathed.

Bank of China (BoC/中国银行) announced USD 2 billion in subprime writedowns earlier this year, and Industrial and Commercial Bank of China (ICBC/工商银行) announced USD 400 million, nothing compared to the more ......er emerging economies. Recent tax breaks for exporters may have staved off a larger number of bankruptcies, but several economists have noted that the tax breaks may accentuate the problem later on.

Jiang argued that the Chinese government needs to ramp up social programs such as healthcare and education in order to increase Chinese people’s disposable incomes and stimulate internal demands. As the economic crisis continues, this might become less of an option and more of a necessity.