Can the Chinese “dragon” save us from the worst recession in 70 years?

It’s an important question for any investor if they plan on making any long-term investment decisions during this global downturn.

In an interview with the Financial Times yesterday (Monday), Chinese Premier Wen Jiabao said his government is ready to expand on the $586 billion (2 trillion yuan) stimulus package it unveiled late last year.

China’s exports advanced at a 28% pace in May, despite growing economic turbulence in the United States and Europe, underscoring yet again that the Asian giant doesn’t need Western markets to flourish.

Fears are growing in China that inflation may start to affect more than just food prices. Consumer prices in China rose 8.5% in April from a year earlier.

“Resurgent inflation, everyone agrees, seems a global problem while a slowdown may be largely limited to the US with some spillover effect to Europe,” according to a report in India’s Financial Express newspaper.

China exported deflation for the last 15 years by stocking the shelves of retailers in the West with products made in their factories employing cheap labour and easy capital.