BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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Give domestic economy its chance
By Op Rana (China Daily)
Updated: 2009-03-06 07:42
The global financial crisis and the resultant economic downturn back home have made this year's sessions of the National People's Congress and the Chinese People's Political Consultative Conference all the more important. The economy is not what it was even a year ago.
But thankfully, before the financial ills can numb all the domestic sectors, the central leadership has realized exports can no longer drive the economy. The alternative is to boost domestic sales so that it leads the economy out of its purple patch. The economy has grown at breakneck speed over the past three decades, driven largely by exports. Such has been the rise in exports that the country today has nearly $2 trillion in foreign exchange reserves. But the continued success on multiple fronts numbed our sense of scrutiny, and we began believing that overseas investment in the country and exports were the only roads to a flourishing economy. None would argue that the magnitude of the country's growth since the reform and opening up is unprecedented in the annals of human civilization. But that rollercoaster economic ride, fuelled by exports, created something else: inequality, between coastal regions and interior areas, between cities and the countryside. It widened the gap between the rich and the poor, too.
The central leadership's goal is to increase domestic demand. But before attempting that we have to correct the rich-poor, city-countryside divide. If the rich and/or urban folks escape unhurt in these bloody economic times, and the poor and country people are the only ones to suffer, it could create social unrest. Recession seems to have set in truly in the US. That indirectly would mean more problems for China. The leadership has to take steps, and effective ones, to reduce the rich and poor and city and countryside divide. But will the leadership accord priority, once more, to the socialist virtues of self-reliant growth, promote labor-intensive industries and take steps to ensure the sustainability of agricultural production? New land reforms have already been announced, but then governments at all levels now have to ensure the regulations are not abused. Cheating farmers out of their land or usurping arable land to set up non-farming industries can spell disaster, both on the individual-social level, as well as for food safety. It's true that the country is stronger in infrastructure than what it was during the Asian financial crisis. But advanced infrastructure itself cannot generate demand. It is here that self-reliant growth and agrarian reconstruction could help.
Let's hope the central leadership's decision to look inward to maintain steady economic growth gains permanence and is not neglected once the global economy recovers. The adherents of the market economy may cite the success of the past 30 years to revert to the export-oriented model once the financial dust settles across the world. They may oppose steps to reduce inequalities and bridge the ever-widening rich and poor gap to generate domestic demand, too, and instead prefer to play the waiting game till the international trade cycle enters the recovery mode. But every recovery ends in another downward slide. Given the state of the global economy today, a rising trend is likely to end in a slide sooner than later - and a second financial blow could spell disaster for a large country and major (developing) economy like China. Looking inward, after all, has its advantages. E-mail: oprana@hotmail.com
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