CHINA'S ECONOMY IS BACK, WHILE THE US STILL FLAILS

       Only eight months ago, thousands of Chinese workers rioted outside factories closed by the global economic downturn. Now many of those plants have been reopened and are hiring again. Some executives are even struggling to find enough temporary staff to meet Christmas orders.
       The image of laid-off Chinese workers returning to jobs is in sharp contrast to the US, where even as the economy shows signs of improvement, the unemployment rate continues to march toward double digits.
       The Chinese government says unemployment is falling, and even the hardest-hit factories - those depending on exports to the US and Europe - are starting to rehire workers. No one is talking about a jobless recovery.
       Even the property market is picking up.For instance, in the industrial town of Wuxi,145km from Shanghai, prospective investors queued on one recent Saturday to buy apartments in the still-unfinished Rose Avenue complex. Many of them slept outside the sales office all night.
       "The whole country's economy is back on track," said Shi Yingyi, a 34-year-old housewife who joined the throng."I feel more confident now."
       The confidence stems from China's threepronged effort - a combination of stimulus,liberal bank lending and broad government support for exports.
       The Chinese central bank said the country's economy surged at an annual-equivalent rate of 14.9% in the second quarter. The US economy shrank at an annual rate of 1% in the same period.
       "So often China and the US are mixed together as being in the same situation, and that is totally wrong," said Xu Xiaonian, an economist in Beijing with the China Europe International Business School.
       That does not mean the two nations are not connected, of course. China's rebound in growth may slow if the US economy does not pick up. China needs the US to buy its goods, and the US needs China to continue to buy its debt.
       This mutual dependence makes it harder for either country to let the current dispute over Chinese tyres and US chicken and car parts to grow into a trade war.
       China has been able to disburse its stimulus much faster, turning it into new railways and roads.
       China's Finance Ministry announced in late June that half the US$173 billion in central government spending had already been allocated to specific projects.
       The White House said in early July that a quarter of the spending authority and tax cuts in its $789 billion stimulus package had been allocated or used.
       But even more of an impetus to China's recovery, economists say, are two other government efforts that are paying big dividends - looser bank lending and government support for exports.
       The state-controlled banking system in China - which breezed through the global financial crisis with minimal losses as US financial institutions reeled - unleashed $1.2 trillion in extra lending to Chinese consumers and businesses in the first seven months of this year.
       That money is financing everything from a boom in car sales, up 82% in August from
       a year earlier, to frenzied factory building.
       Beijing also has given huge tax breaks and other assistance to exporters. They include placing broad restrictions on imports and intervening heavily in currency markets to hold down the value of the currency to keep Chinese exports competitive, even in a weakened global economy.
       Indeed, subsidies abound at all levels of government. The Wuxi municipal government just offered up to 100,000 yuan (4.95 million baht) to each local business that increases exports in the last three months of this year.
       Still, while China's recovery seems well under way, not all the laid-off throughout China have been hired back.
       "Some plants reduced worker numbers by 20% to 30%, now they hire back 10%,"said Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, which represents export-oriented factories employing 10 million Chinese workers.
       Even so, US trade data shows that imports from China only eroded 14.2% in the first seven months of this year while imports from the rest of the world plunged 32.6%. China's trade surplus, already the world's largest,was $108 billion for the first seven months of this year.
       "We definitely see an upswing in sales orders in the second half of this year when compared to the first half," said Gu Fung,the sales manager at the Wuxi Baolai Batteries Company.
       China's well-capitalised banking system allowed for rapid investment.
       Chinese banks came into the crisis with enormous excess reserves, the result of three years of tight regulatory limits on lending to prevent the economy from overheating. When those limits were removed, and authorities urged bank executives to lend, the total value of loans outstanding shot up more in the first seven months of this year than in the previous 24 months.
       By contrast, total loans and leases outstanding at financial institutions insured by the Federal Deposit Insurance Corporation actually fell $249 billion, or 3.2%, in the first half of this year.
       Though Washington has used taxpayer money to bail out US banks, it does not have Beijing's power to force banks to lend that money to businesses and consumers.
       As much as a third of the extra bank lending in China appears to have gone into real estate and stock market speculation. But the bulk has gone into investments by companies and local governments, with tangible results.
       China's currency and trade policies, though highly effective, would be hard for the US to emulate.
       For instance, government intervention in currency markets has prevented the yuan from moving appreciably against the dollar in more than 14 months, and has pushed the yuan down by 18% against the euro since March.
       Government agencies have been told not to buy imported goods with money from economic stimulus programmes unless no domestic alternative is available.
       Washington has imposed a less restrictive rule, misleadingly known as "Buy American",that says building materials for the stimulus programme must be bought from any of the 39 countries that have agreed to free trade in government procurement - which China has not.