ASIA: by Jeffry Babb News Weekly
China convulses but won't collapse
, June 15, 2002
Predicting the downfall and imminent collapse of China has become quite fashionable lately.
Journals such as the Asian Wall Street Journal
give the matter coverage, and even its letter column has dire predictions. What is the truth of this all? The fact is, China has probably been misreporting its GDP growth figures for years.
For several years, the Financial Times
of London, one of the world's most authoritative business journals, has been calling attention to the fact that the figures are dodgy, as has The Economist.
The truth seems to be that the economy is growing, but whether it is clocking up the regular 7 percent claimed is doubtful. Why? The answer should not surprise News Weekly
readers - cadres in charge of various areas of China's economy only get promoted if they meet their target - and that target is 7 percent.Change the facts
Thus, in the time-honoured fashion of totalitarian regimes everywhere, if the facts don't fit the theory, then the facts are wrong and should be changed.
The consensus is that China is indeed growing, but not by as much as claimed by the authorities, and a lot of that growth can be put down to government deficit spending.
China is an engine of growth for the whole Asia-Pacific region. If China goes bad, it will have a drastic effect on Australia and its near neighbours.
The world's four biggest economies now are the US, Europe, Japan - and China.
No-one could seriously argue that China is not vital to Australia's future, but Australia would do well to learn from its Asian neighbors how to live with this restless giant. Taiwan's leading English-language newspaper, the China Post
, editorialised that Australia is kowtowing to mainland China because of the refusal of senior ministers to meet the Dalai Lama, during his visit to Australia recently.
Traditionally, all other nations are expected to defer to the Middle Kingdom as all vassal states should.
The Chinese are only out for the best deal they can get and when it comes to raw materials - which is all China wants from Australia - it will play off one supplier against another in time-honoured Asian tradition to get the best deal it can.
China is increasingly a nation of vast contrasts in wealth. The coastal region, particular around the Pearl River delta region that includes Hong Kong, Canton and Shenzhen is booming, as is Shanghai.
The ideologues must be disappointed that the Shanghainese threw off 50 years of Communist indoctrination with alacrity and returned to their capitalist ways with increased fervor.
As well as the Shanghainese, all the usual suspects are returning - the Hong Kong and Shanghai Bank and the "Princely Hong" - Jardine Matheson, among them.
Even areas that are relatively prosperous, such as the verdant Hunan Province, from whence Mao Tse-tung hailed, are clearly lagging behind the enormously wealthy coastal regions.
Taiwan has not been caught napping - indeed, it arguably is the most important investor in China, with some US$100 billion invested, mainly in the small and medium enterprises (SMEs) that have driven the industrial and commercial revolution in China.
Exact figures are hard to come by, but it estimated that there could be as many as a million people from Taiwan on the mainland, with some 400,000 in the Greater Shanghai area, including Suchow, alone.
Will China collapse under the weight of its World Trade Organisation (WTO) obligations? One Queensland businessman says China is so inefficient that he can deliver a container of bricks from Brisbane cheaper than he can get the same bricks in Beijing from Chinese sources - and that's not even taking the gap in quality into account.
Chinese train stations are constant seething masses of peasants on the move with their possessions in old rice bags, the sort of crowds one sees only in Australia on Grand Final day at the MCG.
The base of China's wealth is in its SMEs. The wood ducks who led the charge into China have duly had their pockets emptied and the enterprises that remain are stayers.
Companies such as Cisco Systems, a leader of the high tech boom, have China in their sights as one of the few growth areas remaining in telecommunications.
China might fall into a hole, but it is unlikely to unravel completely, unless it descends into a morass of political madness such as a new Cultural Revolution. Maoists are far less popular than capitalists in China today, but there are still a lot of them.
They are the only people who can destroy China's capitalist revolution, not the market.
Under the new market system, China might convulse, but it will not collapse.