[A-List] Restructuring the Chinese Economy

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Notwithstanding the constitutional guaranteee of private property rights, which to many seems a revisionist slipage, the focus of redirecting GDP growth target towards people-based and environmentally-friendly develpment in Chinese policy circles is very encouraging. 

Yet the question needs to be asked whether standard GDP measurements can be redefined so that populist and environomentally conservatory policy will not necessarily translate into slower GDP or income growth.  Much life improving and community development  jobs, such as child care, elderly care, teachers, simple technology transfer and manangement assistance can be created with minimum capital input and much environmental restoration  activitites such as tree planting, water projects and development projects for national parks and provincial parks and urban parks can absorb unemployment and raise wages. The key is to redirect excessive dependence for export to earn dollars which are then reinvested in the dollar economy, rather than the yuan economy.  China should keep the current exchange level of the yuan and its exchange control regime so that national credit in yuan can be freed to be used to finance much needed domestic development.  Kick start a vast expansion domestic consumer demand by raising wages to absorb the current manufacturing overcapacity. This can be done by an expansion of the yuan money supply through the state owned enterprise system, rather than dismantling them through privatization.  With expanded demand, the SOE's will turn profitable by producing consumer goods.  Export will earn dollars to pay for import of need raw material and energy, but not used to accumulate dollar reserves that is useless in the yuan economy.

Demand for cars is good, but China should consider alternatives to private car ownership as in the West.  This business of one car per adult in the West is madness.  Cars should be owned publicly with consumer enjoying use rights similar to the system of car rentals in the West.  People should be able to command the use of car as they need them. And holidays and commuting hours should be stacked to avoid congestion and reduce peak damand. Why should every stop work on week ends and the economy stops operating two days out of seven?  It is merely a religious relic of Juda-Christian culture. It's better the two sevenths of the population go on holidayon a roting basis and the economy operates everyday of the year.

Per capita income should and can be doubled every year for thirty years with increase expenditure on non-materialistic consumption.  To build a new socialist economy, we need to restructure more than financial arrangments

Henry C.K. Liu

RMRB Commentary on Problems Behind Just-Achieved $1,000 Per-Capita GDP
Beijing Renmin Ribao (Internet Version-WWW) in Chinese 07 Mar 04 p 5
RENMIN RIBAO
Sunday, March 7, 2004
Journal Code: 326 Language: ENGLISH Record Type: FULLTEXT
Document Type: Daily Report; News
Word Count: 827

"Commentary on Two Sessions" by Jin Caiwei: "Thoughts on the Per-Capita GDP of $1,000"

(FBIS Translated Text)

The per-capita gross domestic product (GDP) of China has scaled a new height by breaking the $1,000 mark. During deliberations on the government work report, some deputies said that this fact is proof of fast economic growth in our country, with a strong momentum and tremendous achievements, but it does not change the essential national condition that China is still in the initial stage of socialism. It also demonstrates that in the process of modernization, the development of our country has taken on features unique to this phase, unlike those of the previous phases. It is very important to grasp such phasic features, study the phasic changes, and tackle the phasic issues.

The per-capita GDP of $1,000 means that social consumption has reached a certain level. The evolution from the "three major possessions" of the 1980's (color television set, refrigerator, and washing machine) to today's new "three major possessions" (housing, computer, and private car) indicates that China has moved on from the league of low-income countries to join lower middle-income countries. Not only have cars, housing, travel, and so on become new consumer items that are much sought after, their quality is also improving. But we should realize that expectations of a better life must not outreach what is realistic or possible at the current level of economic development. Economic development is an evolutionary process and meeting the demand of the people is also a gradual process. Therefore, expectations must not be allowed to grow beyond reasonable bounds and the will to fight must not be slackened even for a moment.

The per-capita GDP of $1,000 means that the total economic supply and demand have grown to a certain size. Further acceleration of development will put a great strain on resources. The shortage of coal, electricity, and transport is indicative of the conflict between rapid development and insufficient resources. It is therefore an increasingly pressing priority to change the mode of economic growth from extensive growth to intensive growth, put an end to wasteful practices, cut consumption, raise the efficiency of resource utilization, and build an economical society. Once this problem is properly solved, we can develop in a faster and better manner.

The per-capita GDP of $1,000 means that the economic structure will undergo a greater change, with the share of the service sector increased, the reorganization of the manufacturing sector accelerated, the level of urbanization raised, and so on. We should grasp this trend with a sober mind and speed up technological advancement, promote industrial upgrade, and push forward the urbanization process. If we can smoothly achieve the economic transformation and structural optimization, we will be able to scale another height in our economic development.

The per-capita GDP of $1,000 means the income gap between urban and rural areas, between different regions, between different industries, and between different groups of society has a tendency to widen. Unbalanced development is normal, because of different circumstances. Letting some people and some regions become rich first and help those lagging behind in order to achieve common prosperity is a natural element of development. The living standard of our nationals in both urban and rural areas is generally improving. This is the fundamental aspect. But we must not overlook the "widening gap" because of the "general improvement;" nor must we see the "widening gap" only, to the neglect of the "general improvement." Properly balancing between efficiency and fairness and handling the relationship of interests among various parties is very important to the reform, development, and stability.

In his government work report, Premier Wen stressed that this is a very crucial year for China's reform and development. "Crucial" is no ordinary word here, but represents an accurate understanding and judgment of the situation and the tasks on hand. By having the big picture in mind, one can look far and wide; by focusing on the priorities, one can remain seized of the central issue. We should draw on the success stories of economic and social development, both at home and abroad, and gain a profound understanding of China's basic national conditions and its important tasks in the present stage. Leading cadres at various levels should firmly adopt and conscientiously implement the scientific conception of development. This is the only way to provide an important guiding ideology and basic working principle for properly tackling and solving the numerous conflicts in the course of economic and social development, whereby we can assess the situation, make the best of it, smoothly realize the grand goal of building a well-off society in an all-round manner, and continuously open up new prospects in the socialist cause with Chinese characteristics.

(Description of Source: Beijing Renmin Ribao (Internet Version-WWW) in Chinese -- Internet version of daily newspaper of the CPC Central Committee (People's Daily). Root URL on filing date: http://www.peopledaily.com.cn)

Compiled and distributed by NTIS, US Dept. of Commerce. All rights reserved.

AFS Document Number: CPP20040308000068
City/Source: Beijing Renmin Ribao (Internet Version-WWW)
FBIS Document Number: FBIS-CHI-2004-0308
Geographic Names: China
NewsEdge Document Number: 200403091477.1_a72d0026335a1719
Original Source Language: Chinese
Region: China
WNC Document Number: 0hubbqv035ag85
WNC Insert Date: March 9, 2004

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