Sat, Feb 11, 2012 - Page 8 News List

How strong is China’s economy?

By Sushil Seth

Yet the government has once again eased up on liquidity because it fears a contraction of the economy. This kind of stop-go economic approach is too arbitrary for a country of 1.3 billion people, which needs more jobs with a strong component of social welfare for difficult times. As it is, China’s estimated 300 million floating rural migrants working in the urban economy are not entitled to the benefits that accrue to their urban cousins.

Many poor and low-income Chinese have difficulty accessing education and health facilities for their children because of prohibitive costs.

After all, China calls itself a socialist country and presumably seeks to promote economic and social equity.

Tsinghua University’s Social Progress Report last year warned that China had fallen into a “transition trap” and faces a series of systemic “abnormalities,” such as lopsided growth that has privileged the state and its monopoly industries.

It is a top-heavy system with entrenched corruption. It needs overhauling. However, with a small elite at local, regional and central levels controlling the levers of power, it is easier said than done. This elite has parceled out businesses among their children and a select group of favorites.

Given this situation, any systemic transformation would seriously impact the relatively small political and economic elite that feed on the system.

This is why that despite all the noise about corruption and the need to eradicate it, nothing much can be done because of the nature of the system.

Liu Xiaobo (劉曉波), a Chinese Nobel Peace Prize laureate who is serving an 11-year prison sentence, has said: “In China the underworld and officialdom have interpenetrated and have become one. Criminal elements have become officialized as officials have become criminalized...”

Apart from entrenched corruption, there is rank inefficiency, colossal waste, structural imbalances and overproduction — with social justice and welfare a serious casualty.

Since the system lacks transparency and accountability in the absence of a participatory and responsive political system, China’s economy will continue to sputter with no medium or long-term solution.

To sustain growth, China needs political reform, as even Wen said.

“Without political restructuring, economic restructuring will not succeed and the achievements we have made in economic restructuring may be lost,” Wen said last year in Beijing.

“If we are to address the people’s grievances we must allow the people to supervise and criticize the government,” he added.

There is no chance of this happening any time soon, if ever.

Sushil Seth is a commentator in Australia.

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