Part I analyses the impact of the global financial crisis upon China and the way in which China's policymakers responded to the crisis.

Chapter 1 (‘Re-balancing in the Face of the Global Financial Crisis (1): November 2008’) was written at the outset of the global financial crisis. In a world of weakly regulated financial institutions and freely flowing capital across national boundaries, the high-income economies were fundamentally susceptible to speculative activity. This was itself the consequence of structures created by their own governments, supported by the mass of the population. Government regulatory policies in the high-income countries were ‘captured’ by the giant global banks that had been created as the twin brother of the global business revolution (see Chapters 4 and 5). Deregulation was welcomed by households and voters. They watched happily as their paper wealth rose and they were able to steadily increase their debt based on their illusory increase in wealth. Across the high-income countries voters elected governments that pursued these policies.

The crisis caused enormous difficulties for China, exceeding even those of the Asian financial crisis. China's long-term policy of ‘reform and opening up’ had led China to be far more deeply integrated into the global economic system than other developing countries. It had moved from an exceptionally low foreign trade ratio at the start of the reform process, to an exceptionally high foreign trade ratio. Such an ‘unbalanced’ pattern of development carried high risks.