Talk about a “February crisis” began in China. Since the Lunar New Year falls in late January this year and because of the large number of companies that have closed or are closing as a result of the economic crisis, next month may begin with a wave of unemployment sweeping across China causing social instability.
In addition to sending the unemployment rate into a double-digit percentage, the economic crisis is also affecting the middle classes, who have acted as a buffer between China’s privileged and lower classes. Their addition to the ranks of unemployed will have a direct impact on the Chinese Communist Party’s (CCP) rule. The upshot of this is that since November the CCP has done its best to help the middle classes ride out the storm by propping up the stock market and the real estate market. These attempts include trying to push the Shanghai composite index to somewhere between 2,400 points and 3,000 points to help the middle classes who entered the market that reached its height of 6,124 points around the time of the CCP’s 17th national congress in the fall of 2007.
However, although Chinese Premier Wen Jiabao (溫家寶) has spent 4 trillion yuan (US$586 billion) trying to prop up the market, the index has barely increased from its low of 1,678 points in November and is still languishing below the 1,900-point mark.
In early November, Hong Kong Chief Executive Donald Tsang (曾蔭權) warned that the economy would slow down this year. Before that, a wave of bankruptcies occurred among Hong Kong-invested businesses in the Pearl River Delta, a situation that is likely to deteriorate further after the Lunar New Year.
In late October, Li Ka-shing (李嘉誠), Hong Kong’s richest man, stopped making new investments anywhere in the world. He recently also sold his shares in Bank of China and Bank of America Corp is selling part of its stake in China Construction Bank Ltd. The question is, is this a foreboding of more to come.
During an interview with the Washington Post on Dec. 9, President Ma Ying-jeou (馬英九) said: “The idea is not to encourage our people to invest on mainland China, because the investment climate over there isn’t as good as it was before ... So the idea is not to encourage investment over there, but instead to make Taiwan’s own investment climate better.”
In 2007, during the presidential election campaign, I warned about the restrictions on foreign businesses included in China’s Foreign Investment Industrial Guidance Catalogue (外商投資產業指導目錄) and now Ma talks about the investment environment as not being “as good as it was before.” The man has some nerve.
Compared with China and Hong Kong, Taiwan’s government is being optimistic if it thinks issuing consumer vouchers is enough to solve the problem and that China can be relied upon to solve all the other economic problems. Apart from speeding up Taiwan’s opening up to China, all Ma is doing is running around performing his “spending show.”
I don’t think there is much risk that people will save their consumer vouchers for their historical value. It is pretty clear that they are meant for spending, so there is no need for Ma to run around promoting their use. What worries the public more is any unexpected problems that may occur because of the government’s arrogance and inability. The only reason Ma is promoting the vouchers and encouraging spending is because he wants to create an image of himself as “Ma the Savior.”