China moves to adjust its economic strategies

SPECIAL REPORT: CHINA

In reaction to the global economic slowdown, China in 2012 and beyond aims to focus on growing domestic consumption and correcting imbalances in its development, officials said.

China has thrived as the so-called factory of the world, but professor Ma Fuyung of the Chinese Academy of Governance said that his country’s current pattern of growth was “not sustainable.” The Academy is the institution tasked to train mid- and high-level civil servants in China.

In a recent meeting in Beijing with visiting journalists that included a representative from The Manila Times, Ma said that China’s economic growth would likely slow down to 8 percent in 2012.

China’s economy was expected to grow 9 percent in 2011, Xinhua News Agency reported. And in earlier years, China’s economy had been growing in double digits, raising fears that it could overheat.

Speaking through an interpreter, Ma painted a robust economic picture of China since it opened up to the world more than three decades ago. He said that China’s gross domestic product (GDP), which is the cost of all final goods and services produced by a country in a year, grew from about 365 billion yuan in 1978 to 40.120 trillion yuan in 2010. Currently, one yuan or RMB is equivalent to about $0.158.

China’s foreign reserves have also grown, from $170 million in 1978 to $2.8 trillion in 2010, he added.

Plus, the quality of Chinese life has improved, Ma also said. The average life expectancy increased from 64 years in 1978 to 72.5 years in 2010. He added that Chinese today were more educated, with the average of school years completed rising from 4.6 years in 1982 to 8 years in 2009.

Despite the great progress made, Ma said, China also faces problems.

He conceded that China, which is export-driven, would be affected by economic crisis unravelling in Europe and elsewhere. But he said that problems were being addressed. Ma explained that the Chinese government has been working on improving the quality of development at the expense of rapid growth rates.

The professor also said that there was more focus on domestic consumption – given that export markets were in trouble. Chinese media reported that there would be zero growth this year.

Ma also noted that China, with a population of more than a billion, has a large domestic market. “If we can tap the domestic market, the Chinese economy would have a large driving force.”

Professor Ma said that an 8-percent growth would not only be the “optimal” speed for China, but a slower pace would likely increase unemployment.

Unbalanced growth

Even though Ma expected China to weather the fallout from the global financial crisis, he said, “I have to admit that there are problems with development in China.”

One of the main concerns is the widening income gap.

In 2007, Ma said, the top 20 percent of the population earned seven times more than the lowest 10 percent of the Chinese. The professor added that the top 10 percent earned 23 times more than the lowest 10 percent of the population.

By socio-economic class, Ma explained, Chinese society was shaped like a pyramid, meaning that most people live in the lower brackets, the fewest in the upper class, and the middle class was still small.

China’s Gini Coefficient, which is a measure of a country’s income gap, has actually worsened since it opened up to the world, the professor said. The Gini Coefficient was 0.3 percent in 1978 and was still just 0.4 percent in 2000, he told the journalists. But currently it was at 0.74 percent.

A Gini Coefficient of higher than 0.4 percent was “problematic,” he explained.

Below 0.3 percent meant that the economy was well distributed, and a range of between 0.3 percent and 0.4 percent suggested that were was an income gap but it was still within acceptable paramaters, Ma told the journalists.

There was also a pronounced income gap between urban and rural areas, Ma said. The average income of city dwellers was 1.6 times higher than those of people living in rural areas – although the national average has been growing annually at about 7 percent since 1978.

He said that the government has been taking measures to close the income gap, such as speeding up the development of social programs like social security as well as improving maternity benefits and occupational safety standards.

In another meeting with the visiting journalists, Li Zhongjie said, “We are aware of our problems.” Li is the deputy head of the Party History Research Center of the Communist Party of China (CPC), a position that carries the rank of vice minister.

Despite being the second-largest economy in the world, he said, “We will never treat ourselves as a developed country that is better than the US.”

The United States, despite its economic problems, remains the largest economy the world.

Li said, also speaking through an interpreter, that among the primary concerns were the unbalanced economic development and the incidence of poverty.

But Vice Minister Li explained part of the poverty problem in China could be attributed to the government’s definition.

“With 1,200 RMB [a month], you can make a living in China,” he explained. But the international standard considers a person as extremely poor if he or she earned less than $1 day or about 2,000 RMB or yuan a month, Li added.

China has raised the threshold to $1.5 a day, but in doing so, the number of poor people have increased, he explained.

Still, professor Ma said a mere 2 percent of the population were poor, including 26.88 million Chinese living in rural areas. That was better than when China first opened up in 1978, when 250 million Chinese in rural areas, about a fourth of the population then, were living in absolute poverty, he added.

Wang Zhongwei, vice minister of China’s State Council Information Office, likened the “right image” of China to that of a coin. One side, there was rapid economic growth, but on the other side, development was unbalanced.

On one hand, Wang added, China has achieved much, but, on the other hand, it still has a lot left to do.

Also speaking through an interpreter, the vice minister said, “China is moving along rapidly, but it has many challenges moving forward.”

Building a “new society”

Looking ahead, Vice Minister Li also said that China has a long way to go.

The government aims to build a “new society” by 2020, which could coincide with the centennial anniversary of the Communist Party, he added.

China wants to be a modern socialist country that has a strong economy, Li said.

He credited China’s success to long-term planning. In China, a short-term plan was 10 years. A long-term plan ranges from 50 years to 70, he added.

Such planning was not possible in most other countries where the government of the day does not stay in power that long, Li explained.

But in China, the Communist Party has ruled since 1949.

China’s political and economic ideology has changed much since then – from communist to open economy more akin to a capitalist country. Regardless of the political and economic system, Li said, the purpose of the government was to make China stronger and to make the Chinese more prosperous.

“If we fail,” Li added, “we could not continue ruling.” –Dante “Klink” Ang 2nd, Executive Editor, Manila Times

Editor’s note: The foreign journalists’ trip to China in December 2011 was sponsored by the People’s Daily, the official newspaper of the Communist Party of China.