DURING the winter, the closed factories in the Pearl river delta and the drift back from the towns to the countryside told their own story. China, the country that has based its development strategy on becoming the low-cost workshop for the world, was feeling the impact of an implosion in global trade caused by the financial crisis.

Across Asia, empty container ships lay idly at anchor as consumer demand collapsed and stocks of manufactured products were run down. China had always expected — indeed, had planned — a slowdown in its economy once the 2008 Beijing Olympics finished, but it was not ready for the global collapse that followed the bankruptcy of Lehman Brothers last September.

Suggestions that China might be able to decouple itself from the problems that originated in the US housing market proved fanciful. Having caught the flood tide of globalisation for a decade and a half, the world's most populous country was inevitably affected as the tide went out.

Yet everything is relative. Beijing expects China's economy to expand by eight per cent this year — down on the explosive double-digit pace since the turn of the millennium, but a growth rate to die for if you are Gordon Brown, Barack Obama or Angela Merkel.

Already there are signs that the government's fiscal boost — worth 16 per cent of gross domestic product over two years — is having an impact. A country that for three decades has been a curious mix of Karl Marx and Adam Smith has now turned to John Maynard Keynes to speed its way out of the global downturn.

“Because of China's structure, the government has direct levers to spend money quickly,” said Prof Peter Williamson, of the Judge Institute of Management in Cambridge. “Whereas in Britain it can take years to get an infrastructure project going, in China things can happen immediately.”

Much of the stimulus package is planned investment that has been fast-tracked rather than new money, but Gerard Lyons, the chief economist at Standard Chartered Bank, says it will make a difference. “The reality is that Beijing has announced a lot of new measures and they have started to push these measures through. They have pulled out all the stops.”

The real issue for China, however, is not whether the state can push the growth rate back above 10 per cent next year; the consensus among economists is that it certainly can. Periods of rapid growth are by no means exceptional in Asia Taiwan grew at 9.4 per cent a year for more than a quarter of a century after 1962; Singapore expanded at much the same pace between 1967 and 1993; Japan's purple patch was the period between 1960 and 1973, when its average growth rate was 10 per cent-plus. But China faces three sets of challenges that will shape the way it — and the global economy — evolves over the next half century.

At the root of everything lies the question of whether the country's political structure is conducive to sustained growth. In the West, the classic pattern of development has been for economic change to stimulate demands for political reform and greater democracy. Despite the arrival of designer labels to the glitzy shopping malls of Shanghai, China remains a one-party state and there is little evidence that the ruling communist party has any intention of loosening its grip.

Anxiety that rapidly rising unemployment, particularly among disaffected graduates, might put millions on the streets this summer demanding change, helps explain both the scale and the speed of China's economic stimulus. Memories of Tiananmen Square are still vivid for the policy elite in Beijing.

But some economists believe the fear of political change will hold China back. Prof Andrew Tylecote, of Sheffield University, believes the top-down fiscal package exacerbated the fundamental weakness of the economy — its lack of a thriving private sector. China, though, is the country that pioneered paper, the compass, steel, the wheelbarrow, gunpowder, canals and a host of other innovations while western Europe was still struggling to emerge from the Dark Ages.

In more recent years, Chinese expats have taken their entrepreneurial skills around the world, and in the domestic market Chinese companies are about to overhaul western multinationals in patent filing for the first time.

— The Guardian, London