THE BEIJING AXIS China Business in Perfect Strokes

China has recovered from the financial crisis-induced slowdown in better shape than ever, with solid prospects for 2010. With the stimulus of government investment, China's economy left the financial crisis in its wake to march on past 8% GDP growth in 2009. Now, poised to become the world's second-biggest economy, China is readying itself for the challenges of 2010 and the next stage of its relentless rise.

At the start of the second decade of the 20th century, China's meteoric rise has reached truly historic proportions. In a period of immense volatility in the global economy, China has not only held its own, it has emerged with flying colours more confident and more relevant than ever before. We can only be surprised once more at how surprising China's relentless rise is turning out to be.

While the world was caught up in the economic turmoil of 2009, China shrugged off a slow start to the year and raced ahead, leading the prospects for global recovery as it went along. While the world's economies contracted, China's expanded; while world trade decreased by 15% between Q2 2008 and Q2 2009, China gained market share. In short, there seems to be no stopping the inexorable rise of the middle kingdom, and observing this historic process at first-hand is a remarkable and humbling experience. China really does live up to all the hype; in fact, it exceeds it, and its hard to overestimate China's relevance in the world today.

Analyses of the outlines of China's economy today consistently yields a 'wow' factor. China ended 2009 with a resurgent rise in exports, putting it ahead of Germany as the world's leading exporter of manufactured goods for the first time. Data released in January revealed that China had just surpassed the US to become the world's largest automobile market, and China's imports of raw materials have reached record levels in order to keep pace with rapid economic growth, set to exceed 10% in 2010. Yet the most significant sign of all is that China now seems poised to leapfrog Japan to become the world's second-largest economy, marking a remarkable shift from fifth to second place in only four years.

While developed economies scrambled to limit the damage in 2009, the effectiveness of China's vigorous investment-led response to the financial crisis, along with the continued optimism of its companies and consumers, have been in many ways exemplary. As a result, while China started 2009 with seemingly little hope of attaining 8% annual GDP growth, it ended the year in the more familiar position of having to start concerning itself again with overheating amid forecasts of 10%-plus GDP growth for 2010. China's resurgence in such an inauspicious environment has been a fascinating and pleasantly surprising spectacle to behold, and its robust growth outlook for the current year bodes well not only for itself, but for the whole world, which has depended on China so much during the previous year.

Yet while being without equal in 2009, China's impressive economic recovery in the last year is only half of the story. While China may have had great success in 2009 inciting growth by means of comprehensive stimulus measures, 2010 will be a year when such measures will have to be scaled back, and the sustainability of China's economic growth will be put to the test. This will occur, moreover, in a global environment emerging only in gradual steps from the financial crisis, and a number of key policy decisions will likely have to be taken in China during 2010 on exactly when and to what extent to tighten monetary policy. In addition, China's leaders may have to confront a number of challenging issues with some of its biggest trading partners this year, notably on exchange rate policy and on trade disagreements.

What is certain, however, is that China's remarkable journey will continue in 2010 as its economy marches ever onward, and I hope that this publication will contribute to illuminating some of the complexities inherent in these fascinating and engaging events.