When China puts on a show it does so on a grand scale. After all the pomp and circumstance at the Olympics in August, Beijing raised its economic sights this week with a £375 billion stimulus package to pump fresh life into Chinese growth.

The actual amount of new money being committed is opaque, but the political effect is undeniable - both for the People's Republic and for world leaders meeting at the G20 summit in Washington this weekend.

China has a great advantage over Western governments in the present crisis as its banks are state owned. The financial system has been only partially liberalised. Currency movements are controlled - after a strong rise in the yuan attracted a flood of speculative “hot money”, the authorities took it off the foreign exchange table to keep it stable.

China's financial system is inefficient in many ways, and conceals serious weaknesses, but the People's Republic does not have to concern itself with bank bailouts. As for the stock markets in Shanghai and Shezhen, they slumped before the downturn elsewhere, and have become largely irrelevant, even if plenty of individual investors are licking their wounds from a 60 per cent fall from the peak of 2007.

What concerns Beijing is the impact of falling global demand on exports, with quarterly growth below 10 per cent. After a healthy fiscal surplus last year and in the first half of 2008, China's leadership has dived in head first with promises of huge spending on infrastructure. Details are unclear, and some observers think a lot of the total is programmes already in the pipeline. But the main beneficiaries will be transport, housing, rural infrastructure, water, electricity, technological innovation and reconstruction after the Sichuan earthquake.

As the financial crisis mounted, some commentators speculated that China might use its $2 trillion stockpile of foreign reserves to bail out financial institutions in the West. Given Beijing's losses on earlier investments in foreign institutions, that was a non-starter. But President Hu Jintao will go to Washington this weekend with a different message that others will find hard to match - “We've announced our stimulus package: what are you going to do?”

Other leaders can hardly cavil - as Gordon Brown noted yesterday: “A fiscal stimulus in one country can benefit from fiscal stimuluses that are taking place in other countries.” The problem may be that they simply do not have the kind of money China can wave in the air. How much will Barack Obama be able to rustle up when he gets to the White House?

The father of China's economic reform, Deng Xiaoping, always advised his country to advance cautiously and with as little noise as possible. China does not want a global leadership role. It prefers to let others make the running, probably looking to President Sarkozy as its chosen baton carrier after his talks with Hu in Beijing last month. Its prime concern is to boost the domestic economy, not bail out the world. That, it insists, is its best contribution to the world crisis.

But this week's package serves China's long-term interests as well. Its infrastructure needs modernisation, particularly the railways. The property sector must be weaned off speculation. The countryside must be brought up to speed.

The leadership's interest in safeguarding growth goes beyond a desire to preside over an expanding economy. In the 30 years since Deng launched China's market-led economic reforms, Marxism-Maoism has withered. The legitimacy of the one-party regime rests on its ability to provide increasing material well-being for its 1.3 billion people.

With wealth disparities widening, Hu and the Prime Minister Wen Jiabao have to maintain growth and provide millions of new jobs. They have to rebalance the economy away from exports to domestic demand, away from fixed-assets investment towards consumption, away from labour-intensive, low value-added goods to more advanced products - the first contract for sale of Chinese airliners to a US leasing firm have been signed while machinery and cars were the fastest growing export sectors in the first half of this year.

Sunday's announcement is a step on that path. But it also underlines the shift in the global balance as China's size and resources make it much more than a provider of cheap exports. Its economic health will become more and more entwined with the rest of the world's in ways of which Deng Xiaoping can only have dreamt. The weekend summit will provide an opportunity to chart how that relationship will develop but one thing is certain: for China, China's interests predominate. Mr Brown and others can only hope that there really is symbiosis between Beijing and the rest of the world.

In the year of the nines

1949 Socialism saves China (the communists take power)

1979 Capitalism saves China (with Deng's reforms)

1989 China saves socialism (by remaining communist)

2009 China saves capitalism

Source: posting on various Chinese websites

Jonathan Fenby is China director of the research company Trusted Sources and author of The Penguin History of Modern China

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