As of 2009, China's economy had recovered from the global recession that began in 2008

Use aggregate demand and aggregate supply analysis to explain why, and to explain the likely consequences for China of an increase in the growth rate of the global economy.

Policy in China reversed the decline in aggregate demand, substituting fiscal and monetary stimulus for the reduced demand for China's exports. The result was a rapid recovery of output and avoidance of downward shifts of the short-run aggregate supply curve that would have meant declining inflation. With output at or near potential in China, the rise in exports that will accompany faster growth of the global economy will cause a positive output gap and accelerating inflation, unless policy makers in China can again intervene with policies to counteract the positive output gap.