Decoupling from the world, and the economic downturn much of it is experiencing, has proven impossible for China. But its resilience is receiving more recognition, with many leading financial institutions upgrading their 2009 growth forecasts since mid-April.

The adjustments for gross domestic product (GDP) growth, ranging from 0.5 to 2.3 percentage points, were based on signs of a turnaround in the first quarter. These indicators included stronger-than-expected real GDP growth, recovering property investment, a pick-up in power consumption and a surge in bank lending.

Merrill Lynch & Co. said it expected China´s GDP to grow 7.2 percent in the second quarter and 8 percent this year, while Goldman Sachs raised its projection from 6 percent to 8.3 percent, the most optimistic forecast so far. Other forecasts include UBS, which raised its estimate by 0.5 point to 7 percent and CLSA Asia-Pacific, which lifted its outlook by 1.5 point to 7 percent.

China´s policymakers can take heart from these forecasts. Every upward revision, big or small, given the global economic slowdown, might point to a better chance for the nation to achieve its 8-percent growth target. That level of growth is considered necessary to raise living standards while maintaining social stability.

But there´s still the question of whether rapid growth is sustainable. Some analysts believe it isn´t unless China can rebalance its economy and achieve higher efficiency, lower environmental costs and a more reasonable balance among investment, trade and consumption.

QUANTITY OR QUALITY?

In an interview with Xinhua, Stephen Roach, chairman of Morgan Stanley Asia, urged Chinese authorities to get more serious about stimulating private consumption because the global economy remains "pretty weak" and might only achieve a weak recovery.

"China has responded to the crisis the way it has always responded to global problems. That is, using proactive fiscal stimulus mainly in the infrastructure area to provide temporary support in the downturn until the global economy comes back. It worked in the 1997 Asian financial crisis and the 2000-2001 mild recession. But this is a different sort of problem," said Roach.

"Once the stimulus wears off and if there is no follow-through, the Chinese economy will weaken again. I don´t think exports will recover in the weak global economy."

Domestic economists voice similar worries, saying that the speed of growth doesn´t matter as much as the quality. Liu Shangxi, deputy dean of the Research Institute for Fiscal Science at the Ministry of Finance, said that the 6.1-percent year-on-year growth in the first quarter had been "fairly good" for China. But, he said, "sometimes, it´s worth slowing down a bit to have the economy move more stably."

Wang Xiaoguang, an economist with the National Development and Reform Commission (NDRC), the chief planning agency. said that the government´s annual growth target had become mostly symbolic.

For five years in a row, the target was 8 percent, and for five years in a row, the growth rate overshot the target. Wang said the government had faced a dilemma: a cut in the target might undermine public confidence while a rise might tempt local governments to over-invest to meet a high growth target.

The turnaround signs mostly reflected the impact of the 4-trillion-yuan (586 billion U.S. dollars) stimulus package. Meanwhile, retail sales still trailed investment in contributing to growth. Local economists warned that the economy remained unbalanced and vulnerable.

"Historical records show that adjustments in the Chinese economy would take two to three years, on average. Seven months have passed since the impact of the global financial crisis began to tell on the local economy.

"With a turnaround in sight, recovery might come earlier than expected but there are still risks of a further slowdown," Chen Dongqi, deputy chief of the Macro-Economic Research Institute under the NDRC, told a business development forum in Guangdong in late April.

BUYING CURE

It´s widely accepted among economists that China should boost domestic private consumption by leading individuals to buy more and save less. The key question is: how?

"Two big programs" Roach advocates call for doubling the investment in social security immediately to 150 billion U.S. dollars and establishing a goal of raising consumption as a share of the economy from 36 percent to 50 percent within five years.

"What I think is missing here is the social safety net, social security pension and unemployment insurance. Because of the absence of the safety net, China has seen a high level of precautionary saving," he said.

Roach suggested that China develop a private pension system in particular so total employee compensation could rise in tandem with productivity. "Chinese companies need to partner with their workers and provide medical care [and] retirement investing for their workforce. Chinese workers´ total pay package should have both wages and benefits," he said.

Liu agreed that the primary task in expanding consumption was to raise incomes. "Securing the legitimate interests of workers is particularly significant when the economy slumps. It would be like drinking poison to quench one´s thirst if businesses sought to expand corporate earnings at the cost of workers´ pay and benefits," he said.

Low labor costs and massive capacity have propped up China´s prosperity over the past decades. But the proportion of wages to national income has been on a long decline since the 1990s.

Between 2002 and 2006 alone, economists estimate the figure d