[Rhodes22-list] POLITICAL:Change of Pace.....China Editorial NYTIMES

[Ben Cittadino]

Brad (and any other "China Hands");

Caught this in the NYTimes this AM. Thought you might be interested.
Accurate?

"As China Goes, So Goes ... 
Editorial
Published: October 26, 2008 
As the world tips into recession, China’s economic decisions could affect
how other countries fare in the downturn. 

Over the last 30 years, China has hitched its economy to the industrial
world, exporting cheap goods to the United States and other developed
nations, building up an enormous trade surplus that will hit about $400
billion this year. As those industrial economies sputter, China is now in a
position to pick up some of the slack: selling more of its own goods at home
and buying more from the rest of the world. 

To get China’s consumers to spend, the government will need to spend more at
home, investing in public works projects and providing more social benefits
— including health insurance and pensions — so its citizens don’t feel they
have to save so much for a rainy day.

This is clearly in Beijing’s interest, though China’s leaders are still
clinging to the old export strategy. 

China is already feeling the impact of a slower world economy. Both economic
growth and export growth have braked sharply. The slowdown threatens job
creation, direly needed to absorb millions of rural Chinese seeking
employment in the cities. 

Over the summer the Chinese central bank put an end to its short-lived
policy of allowing the yuan to gradually appreciate against the dollar, a
policy aimed at reducing inflation that would also raise the price of
Chinese exports. Last week, the Chinese government announced that it would
increase its rebates on taxes charged to exporters — giving them a further
boost.

But trying to capture a bigger share of shrinking markets in the United
States, Europe and Japan — just as they tip into recession — won’t provide
China much of an economic lift. What it will do is contribute to the
slowdown in the rest of the world by hogging demand. China would get much
more bang for the buck if it focused on stimulating its own domestic markets
for goods and services. 

Given the desperate mess Washington has made of its own financial system,
few countries are eager to take American advice these days. After years of
Congressional China-bashing, Beijing may be especially resistant.

Still, it is in China’s interest to change. China has grown 13-fold over the
last 30 years, thanks to hypercharged exports and white hot investment. But
its economy is lopsided. Consumer spending amounts to little over a third of
economic production, probably the lowest share in any country in the world.
And its overwhelming dependence on exports has made it overwhelmingly
vulnerable to changes in world demand. 

The government in Beijing, which is running a huge budget surplus, also has
money to spare. 

The government has announced some measures to fuel domestic spending
—including a tax cut on home purchases to revive an ailing housing market
and a vague plan to invest in public works. But it must do more to unlock
the savings of its citizens and encourage them to spend. 

To do that it needs to rebuild the system of social insurance that fell
apart when state-owned industries collapsed and were replaced by the private
sector. Government investment in things like health care, education and
pensions would help develop China’s middle class and its domestic market.

A boost to consumer spending would undoubtedly help China weather the
economic storm. But by raising Chinese imports and reducing its dependence
on exports, it would also help the rest of the world." 

Ben C.




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