It has been an accepted fact that the sweeping financial crisis has thrown the world economy into a tailspin. Some Western countries are succumbing to a deepening recession. In China, the chilly winds blowing through the global economy have even put a damper on this year's lunar New Year. The looming question now is which country will be the first to bottom out-the United States or China? Have they laid the groundwork for recovery? Zuo Xiaolei, chief economist at China Galaxy Securities Co. Ltd. in Beijing, discussed these questions in a recent article in the China Securities Journal. Edited excerpts follow:

REVIVAL OUTLOOK: With a solid manufacturing base, China is considered well-placed  to counter this year's bleak economic prospects (ZHU XIANG)

Which country in the world is going to spearhead the resurgence of the world economy? This has been the focus of global attention, because it helps to have a stabilizer in harsh turbulence.

A recent survey of 70 global economists conducted by the Financial Times said that America would outpace other countries in rehabilitating its souring economy, with China following behind it. But, personally, I would put China first given its strong recuperative powers. A solid base for its real economy, a healthy fiscal position and a reliable financial system are the major bright spots the country can count on during downturns.

Solid real economy

China has built up a solid base for its real economy after years of spectacular growth. It has become the world's manufacturing center and the world's workshop, specializing in middle- and low-end products.

The swirling economic washout is eating away at people's purchasing power and has forced them to tighten their belts. But their demand for low-end products will by no means shrivel, because people cannot live without necessities. That's why retailer Wal-Mart Stores Inc. has largely held up while the U.S. car makers have been teetering on the brink of collapse. The export of cheap Chinese products, mostly necessities, is therefore bound to survive the financial storm.

More importantly, the abrupt turmoil has awakened the country to its fragile export-driven growth model and added urgency to its need to ward off downside risks and explore domestic demand.

On the one hand, China should make vigorous efforts to spark domestic demand and in particular domestic consumption so that the economy can quickly get back on its feet. The country's consumer market may be able to pick up some of the slack in the export sector. To achieve that, tapping the deep potential of the rural consumer market is key. As a result, it is imperative for the country to raise farmers' income and improve rural infrastructure such as irrigation, roads and power supplies.

On the other hand, the Americans, hit hard by the credit crunch, may no longer be able to afford excessive consumption, rendering China's export-dependent growth unsustainable in the long run. That also poses an incentive for China to widen domestic demand and rebalance its economic structures. The crisis would spell an opportunity for the country only when it could shore up short-term growth and at the same time polish its long-term prospects.

With a deeper recession looming, the U.S. economy sees three major problems standing in the way of its recovery. First, its once-thriving virtual economy is feeling the pain of massive de-leveraging, because the financial bubble has burst. Moreover, the employment landscape also looks sparse right now, because it is hard for the laid-off Wall Street elites to find employment.

Second, the credit debacle has dried up the financing that many of the country's pillar industries rely on. For example, the auto industry, the real estate sector and the real part of the financial system have been suffering from painful windups. Enterprises in those sectors have been pressed hard by rising labor costs and pension burdens, and now are starved of liquidity as risk-averse banks become reluctant to part with cash.