BIZCHINA / Weekly Roundup
How Chinese bumblebee ignores economic laws
By Khalid Malik (China Daily)
Updated: 2007-07-04 15:45
They were connected to a Chinese condition in a Chinese context. Their
sequencing between policy and institution becomes very important and
probably needs more study.
But detailed policy content may be less important than a more fundamental
transformation - the length and condition for real sustainable growth.
Clearly China has gotten something right. In terms of per capita GDP, an
almost vertical jump is taking place. With the structural changes and
constant ongoing adjustment, China is never aiming for the best, but
trying to bring things together and keep moving forward.
Whenever there was a crisis, and there have been several points of
crisis, the Chinese government responded with additional reforms, not
fewer reforms. Typically whenever there's a crisis, a country's
politicians and policymakers step back because some of the risks are too
high, but in the case of China it was the other way around.
Related readings:
China's economy to grow 10.9% in 2007
Central bank vows tight policy to rein in economy
EU mulls giving China market economy status: WSJ
Economy to sustain fast growth for 2 more decades
China allowed lots of room for local experimentation in its highly
decentralized environment. If some-thing wasn't working, provincial
officials had a lot of flexibility to scale down. This has clearly
produced something useful.
The proof is that the fundamentals are doing better. The tax base has
expanded to about 20 percent of GDP - quite remarkable for a developing
country. This means China is moving into a different kind of economy and
society. Much of the economy is now highly competitive with markets
becoming more important. Trade has been liberalized with economic
expansion remaining strong.
Despite attempts by the government to slow it down, the economy grew by
10.7 percent last year. And yet, remarkably, inflation remained low.
China would not have succeeded to such a great degree without managed
population growth. The estimates are that instead of 1.3 billion, China
would have had a population between 1.5 and 1.6 billion. Clearly, the per
capita growth would have been far less.
Along with development and transformation, China keeps facing challenges.
The social capital is being affected as social cohesion is diminished by
the substantial rise in income and non-income inequality; a rural
population increasingly elderly, female, and vulnerable; and rural-urban
inequalities.
The rights of migrant workers are a challenge. Another challenge is the
aging issue. China is in the unusual situation of being a developing
nation with an aging population, more characteristic of more advanced
societies. And there are bitter signs that the poorest are no longer
taking part in the nation's economic growth. According to World Bank
data, the very poorest of the poor may be slipping backwards even though
the poor may generally be doing better. The fiscal burden remains heavy
at local levels.
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