| Home |
| China |
| News |
| Finance |
| Technology&Science; |
| Travel |
| Entertainment |
| Comment |
| Special |
| US |
| News |
| Finance&Technology; |
| Entertainment |
| Comment |
| World |
| News |
| Life |
| Comment |
| Video |
| News |
| Life |
|
| Search |
All Rights Reserved
Userful Links
[UPI Asia]
[Reuters]
[Washington Post]
[CNN]
[China Free Press]
[CPJ]
[RSF]
[WPFC ]
[CECC]
[China Digital Times]
[EastSouth..Blog]
[France24]
Userful Links
[UPI Asia]
[Reuters]
[Washington Post]
[CNN]
[China Free Press]
[CPJ]
[RSF]
[WPFC ]
[CECC]
[China Digital Times]
[EastSouth..Blog]
[France24]
by Liang Jing On Saturday April 18, Wen Jiabao said at the Bo’ao Forum for Asia on Hainan Island that his economic stimulus package has “achieved initial success, and China's economic situation is better than expected.” This kind of self-satisfied Chinese official discourse is disingenuous, because those in power in China never announce their future expectations, but always say things are better than expected after the fact, leaving no way to judge truth from lies. There were in fact precious few pleasant surprises in China's first-quarter economic data, but as Ye Tan commented, rather they more clearly indicated China's future economic concerns. No one ever doubted the Chinese government could stimulate the economy to achieve short-term growth; those with some knowledge of China's economy did however doubt the capacity of China’s rulers to lead the economy out of recession ahead of the whole world.[1] The risk of stagflation in China's economy in one or two year’s time is, in my view, higher than in the US or other developed countries. The hope of some foreigners that China’s economy will take the lead in emerging from its troubles, and stimulate economic recovery in other countries, is not realistic; the facts are likely to the contrary: the longer we delay the recovery of the US economy, the more difficult will beChina's economic recovery. China's first quarter economic data confirm two of my judgments over the years regarding China's economy: (1) the employment of migrant workers is highly dependent on export demand, and (2) it is very difficult to drive migrant worker employment through government investment. The first judgment was confirmed by large numbers of migrant workers returning home having been unemployed due to the economic crisis, and the second by the limited employment generated by the government’s large-scale investments. A report entitled “Henan: One trillion yuan investment to create 650,000 jobs” appeared in the 21st Century Business Herald on 15 April, which showed how hard it is for the Chinese government to drive employment by expanding investment. In 2009, major focus investment in Henan will exceed one trillion yuan. Yet according to the Henan Development and Reform Commission’s calculations, these key projects will only provide 650,000 jobs. In other words, creating a single job requires nearly 1.5 million yuan of government investment. Major projects getting under way there will provide between 80 and 100 thousand jobs, which is negligible compared to Henan’s 30 million surplus rural labour, and less than a tenth of the 1.5 million migrant workers who have stayed at home after losing their jobs. The report points out as well that “in the past few years, China's GDP growth has not coincided with high employment growth. Relevant research data shows a GDP growth rate of 10% in 2003-06, with new jobs hovering around 8 or 9 million per annum; each percentage point of GDP growth brought only 800,000 new jobs, compared to 2.4 million in the 1980’s.” [2] A major reason China’s rulers have been reluctant to change the highly export-dependent economic growth model, is that such a growth model allowed foreign and private capital to drive employment, and provided government investment a great deal of free space, the government could irresponsibly carry out a variety of very low efficiency, very low employment large-scale investments, and gain high monopoly profits and lots of rent-seeking opportunities. It is now both politically and managerially very hard for the Chinese government to exit an investment model so beneficial to the power elite and so disadvantageous to the people. A major difficulty in changing this investment model is due to the government-controlled financial system. In order to stimulate the economy, China increased credit by nearly 5 trillion yuan in the first quarter. According to a story in the latest issue of Jingji guancha bao [Economic Observer], the China Banking Regulatory Commission believes that if the scale of new credit exceeds 6 trillion yuan p.a., it will create excessive financial risk; yet now after just one quarter, the danger line is in sight. A bigger problem is that the majority of these credit resources have not gone where there was most need. The employment-creating SMEs are still hard put to obtain loans, while firms and institutions with close ties to power have access to lots of liquid resources, with the result that China's deposits are surging, financial speculation is heating up, and the stock market is prospering in isolation from the real economy. While over half of China’s population is below the poverty line according to World Bank standards, China's rulers continue to expect a speedy recovery of the US and European economies, so everyone can sit back and revisit the good old days. Why those in power in China are willing to give money away to foreigners for their consumption to stimulate employment in China, rather than substantially increase the level of national welfare and security is quite puzzling. Are they unwilling or unable? It was reported that on his return from the G20 summit in London, Hu Jintao immediately issued an internal circular calling for officials at all levels to strictly control public opinion on the 40 billion US dollars he gave to fund the IMF. This shows that China’s power-holders have very guilty consciences. However, as long as its leaders still do not know how to upgrade consumer demand among the poor majority, the way to global recovery will not be led by China's economy. [1] (Ye Tan, “Xiaofei xinzheng yuan bi xin yilun ciji jihua zhongyao” [New consumption deal far more important than new stimulus package], Nanfang dushi bao, 17 April 2009 [叶檀： “消费新政远比新一轮刺激计划重要”， 南方都市报，2009年4月 17日(http://yetanyetan.blog.sohu.com/114528339.html). [2] Chen Shanzhe, “Henan: Yi wanyi touzi chuangzao 65 wan jiuye gangwei” [Henan: 1 trillion investment to create 650,000 jobs], Ershiyi shiji jingji baodao, 15 April 2009 [陈善哲： “河南：1万亿投资创造65万就业岗位”， 21世纪经济报道，2009年4月 15日 (http://www2.nanfangdaily.com.cn/nfjx/200904150026.asp). Translated by David Kelly China Research Centre University of Technology Sydney © Copyright 2009 by Boxun News Top of Page |
|
|