If the world was looking for China to save it, the actions of Chinese leaders in the past few weeks suggest they intend to save their own economy first.

China was the greatest contributor to global growth last year - a fitting achievement as the country approached the 30th anniversary of its economic reforms and prepared for the glory of the 2008 Olympic Games.

But this has been a year of tragedy and turbulence. An earthquake took 68,000 lives and will cost billions in reconstruction. The uprising in Tibet and international criticism of the regime’s human-rights record soured the Olympics and damaged China’s image.

Its leaders, preoccupied with stoking up patriotic pride, failed to grasp the impact of the financial crisis. Even before the Olympic flags came down, stock and property markets had plunged, while exports were stumbling. In the past three months, the export sector has tumbled into an abyss.

The Chinese economy is slowing down sharply after almost 30 years of growth and the effects are being felt on the streets.

Riots and demonstrations have been reported in cities across China in protest at a swath of factory closures. Last week hundreds swarmed into an abandoned toy factory in Dongguan, a grimy southern town synonymous with sweat-shops. The protesters destroyed police cars and ransacked offices as managers fled in panic.

Two-thirds of small factories making toys for export have closed in the first nine months of the year. Falling demand and tough new product safety rules in Europe and America mean many will never reopen.

The value of the yuan, which has risen some 20% against the dollar since 2005, has levelled off and may decline. Foreign buyers say China’s cost advantage has already been eroded.

Zhang Ping, the government’s senior planner, predicted mass unemployment next year, saying bankruptcies, production cuts and layoffs will lead to unrest.

The official unemployment rate in Chinese cities is likely to hit 4.5%, the highest in a decade. That total does not include millions of migrants from the interior of the country, many thousands of whom are heading home as companies throw them out of work.

Andy Xie, an independent economist based in Shanghai, estimates that one in five migrants may lose their jobs.

One reason why so many foreign analysts and governments have persisted in false optimism about China is that this has been a slow-motion crisis.

Third-quarter figures, which showed slowing growth, failed to capture the turmoil in the financial system after the bankruptcy of Lehman Brothers and a collapse in export orders for Chinese factories at trade fairs in October.

China’s growth and export figures for the last quarter of this year are expected to reveal the scale of the slowdown.

Official data to November from export-orientated Guangdong province, responsible for 12% of Chinese GDP last year, indicate that its growth has already been cut by a third.

“Guangdong will face a harsh environment with increasing uncertainties and unstable factors,” said Li Miao-juan, a provincial official.

The traditional consensus among economists is that China needs at least 8% growth to sustain its growing population of working age. Forecasts by independent analysts now range as low as 5% growth for next year.

Fears in Beijing of the consequences led the People’s Bank of China (PBOC) to cut its bench-mark lending rate by 1.08% to 5.58% last week, the sharpest reduction since the Asian financial crisis of 1997.

It was a reversal of policy that came after rumours of discord in the secretive circles at the apex of power. There is persistent talk among Chinese financiers that central-bank governor Zhou Xiaochuan was forced to make a Mao-era “self-criti-cism” at internal party meetings for failing to grasp the serious threat posed by America’s sub-prime crisis.

“Some party leaders are enraged that the PBOC went on flourishing its inflation-fight-ing credentials long into the summer when it was clear the situation was grave,” said an international investment banker who asked not to be named.

The central bank has now endorsed a $586 billion (£382 billion) spending package to stimulate the economy. It aims to boost domestic demand by spending on infrastructure such as railways, roads and air-ports. The government will also pour money into earthquake reconstruction, environmental protection and rural housing.

But a closer look at the figures showed that much of the money was already allocated under the 2006-10 five-year plan. It also emerged that Beijing was seeking to raise some of the funds from local governments and private businesses. The effects of the stimulus plan on stock-market confidence proved short-lived once these details were appreciated.

The great hope cited by many foreign economists is that hundreds of millions of Chinese consumers will shed their caution, take out their savings and start to spend.

The reality is that for all the five-star glitz of downtown Shanghai and Beijing that foreign grandees see on their visits, most Chinese people have limited cash to hand.

Thirty years of economic reforms created a system that may look like capitalism but it is not a free market. The monopoly of political power has granted huge rewards to a clique of officials dispensing patronage to their client businessmen.

“Stock prices in Shanghai move on the word of a few,” said a retail broker. “The retail investor counts for nothing.”

The exposure in public trials of the most egregious examples of corruption have fuelled disenchantment among the Chinese public and renewed support for leftists inside the party.

Statisticians measure China’s inequality ratio as one of the most distorted in the world, as if reforms had unleashed an excessive reaction to decades of Maoist egalitarianism.

While the new super-rich enjoy dazzling wealth, an investigation by The Sunday Times among workers at Adidas factories in Fujian province this year found that even in nominal terms many had not seen a wage rise in a decade.

While investment bankers in Hong Kong have talked gaily of a notional $2 trillion in household savings just waiting to be mobilised, Chinese banking analysts paint a very different picture. One analyst puts average household savings at 4,000 yuan, or £382. Many Chinese will see such money as reserves for a medical emergency, schools or care in old age.

And when China’s economy, notionally the fourth-largest in the world, is adjusted to take account of its 1.3 billion population, the country ranks 109th in the world, according to the International Monetary Fund.

Stephen Green, head of China research at Standard Chartered, has cited a per-capita GDP figure of $2,000 to deflate expectations that the Chinese consumer will come to the rescue. “It is simply not reasonable to expect a consumption boom,” he said.

For British businesses in China, reform has brought rich pickings. The roll call of companies - in banking, finance, accountancy, law, aviation, engineering, consultancy, chemicals and retailing - testifies to that.

The Chinese date their reforms from November 24, 1978, when farmers in Anhui province, inland from Shanghai, ended collective farming and began an individual contract system.

The experiment was the work of Deng Xiaoping, who won endorsement for gaige kai-fang - “reform and opening up” at a subsequent Central Committee meeting.

Thanks to Deng, during the next 30 years British companies rebuilt markets on the China coast that had been theirs in the decades of empire and were lost at the outbreak of war with Japan in December 1941.

It has been a remarkable renaissance, if not, perhaps, what the chain-smoking Marxist may have intended.

His heirs face a stern test of their inheritance.

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