Editor: Al Santoli
FAULT LINES IN CHINA'S ECONOMY IGNORED BY WEST
April 5:
[Editor: In the March 21st Washington Post, an op-ed by respected China scholar Dr. Arthur Waldron emphasizes warning signs in China's economy that are being ignored by many Western business and political analysts. An abbreviated version of the editorial follows:]
"Officially, China has for some time been claiming growth rates of 7 percent or more, but information casting doubt on those figures has long been available. Visitors see lots of rural people camped out at urban railroad stations or on sidewalks. Block after block of abandoned construction projects in cities suggest someone has run out of money. Almost daily protests by workers, many violent, are also a clue that all is not well."
"Moreover, even the official figures don't make sense: How can it be that energy use is falling in a booming economy? And unemployment rising (as the official statistics show)? This is unprecedented in economic history. Once again Chinese officialdom has put one over on Western observers. There are a number of prime candidates for the red-faced list, including the CIA and others in the U.S. government who appear to have been clueless; the high-priced reports of the Economist Intelligence Unit and others in the premium newsletter trade, plus all the major media in the West and in Asia."
"How could so many people miss something that, in retrospect, was so obvious? Because of the chronic pathologies of China watchers: groupthink (in the academy and government), fear of Chinese reaction, job pressure (in the intelligence community and the media) and greed and wishful thinking (in the case of business). The reason is that once again we have taken our cues not from our own observations and deductions but from China's official self-presentation. We hear 'economic reform' constantly proclaimed, but fail to observe that it is not really being practiced, at least not consistently and thoroughly."
"The only way China can possibly create enough jobs for its immense population is by adopting a free-market entrepreneurial economic system, in which the state's role is limited to the provision of justice and arbitration according to clear and legitimate rules. In such a system, however, no place exists for a Communist Party, whose justification, in theory, is its skill at guiding the economy and the society. (And whose current reality is its existence as a lawless elite, looting China in the interests of its members.) So the necessary economic reform is out of the question without political change."
"China's economy is dysfunctionally bifurcated. Supply is still largely determined by the Communist Party, which allocates scarce resources to state enterprises manufacturing things people don't want and won't buy. These enterprises are kept afloat by 'loans' (never repaid) from the massive savings the Chinese people have entrusted to the state-controlled banks. Their rule of thumb seems to be: If you are state-controlled and losing money, you qualify for big loans. If you are private and growing, you do not. That is a recipe not for growth but for economic collapse."
Copyright (c) 2002, American Foreign Policy Council
Here is an article I found in today's Taipei Times I thought you might be interested in:
China's safety net is full of holes
The article basically goes over the failure of China's communist system to guarantee social security and how it has led to the recent demonstrations in Liaoyang and Daqing. Further evidence of 'cooked books' and a slower than expected/reported economy?....