[PEN-L:9719] Predicting the economic future of China

[Louis Proyect <lnp3@xxxxxxxxx>]

THE HINDU

April 27, 1999

South Asia, China will grow fast- World Bank

WASHINGTON, APRIL 26. The World Bank has said that South Asia and China
will grow fast enough to reduce poverty by half by the year 2015. "All
developing regions have lost momentum in achieving their poverty goals...
Current forecasts for 1998-2001 suggest that only South Asia and China will
grow fast enough to halve poverty by 2015," the World Development
Indicators says.

The Bank publication argues that South Asia, which had only recently opened
out to the global economy, was insulated from the East Asian meltdown. "But
its export growth and its ability to raise project finance declined -
compounded by G-8 sanctions on India and Pakistan after they tested their
nuclear devices... Pakistan came close to default on its foreign debt and
its freezing of offshore accounts discouraged fresh inflows", the World
Bank notes.

South Asia, the argument goes, has been a stabilising influence in Asia,
even if there has been a slowdown in GDP growth. "Regional GDP growth
should recover to 5 to 6 per cent a year in the next decade. The main risks
are domestic: more political will is needed to accelerate economic
reforms," the publication notes.

The report - which is an annual compilation of key facts together with
analyses of developing countries - is being released when the Spring
Meetings of the Bank and the International Monetary Fund are under way. One
of the points that is being stressed in this year's report is that after a
generation of declining poverty, longer lives and better health, the
efforts to improve key areas of human development are in danger of stalling
on the threshold of the new millennium. . .

====

The New York Times, July 25, 1999

Amid Unrest, Chinese Face Ugly Reality: Deflation

By MARK LANDLER

China's top leaders fled the stifling heat of Beijing this week for their
annual retreat at a seaside resort, leaving behind a city swirling with
propaganda about the crackdown on a spiritual movement known as Falun Gong.

But while the Communist Party has mounted a relentless media assault on the
group, which it outlawed on Thursday, economics rather than politics are
likely to occupy the leaders as they gather in the tranquil resort of
Beidaihe. Specifically, analysts here say they will have to confront
China's economy, which is sputtering, and a reform effort that is in danger
of stalling.

"The attack on Falun Gong comes at a time when they have so much more to
worry about," a party functionary in Beijing said. "We should be concerned
about developing the economy. There's a risk that this will distract
everyone's attention."

In particular, Beijing must figure out how to rebuild the confidence of
battered Chinese consumers. For 21 consecutive months, consumer prices in
China have fallen. That is because, in economic terms, China is in a
deflationary spiral, which means that consumers who are worried about their
futures have stopped buying things.

The deflation has been aggravated by a huge glut in production capacity.
Too many factories are making too many goods, a lot which do not appeal to
China's jaded shoppers."

"It's a very worrying set of circumstances," said T. L. Tsim, an
independent consultant on Chinese politics and economics in Hong Kong.
"Once deflation takes hold, it is very hard to shake off."

Mr. Tsim said the downward spiral in prices had slowed China's once-torrid
economic growth and could hobble it further. It could also derail the
radical reforms of China's bloated state-owned industries that Prime
Minister Zhu Rongji announced with much fanfare in the spring of 1998.

Although China said its economy grew 7.8 percent last year, economists say
that the real number was closer to 4 percent. Even the official estimates
confirm that growth has slowed each year since 1996.

Maintaining robust growth is crucial in China because with a population of
1.3 billion that expands at 1 percent a year, the country must add at least
7.5 million jobs a year just to absorb the people entering the labor force.
And that does nothing to alleviate the existing unemployment rate, which
economists estimate at 10 percent in urban areas and 30 percent in the
hinterland. . .

© 1999, LEXIS®-NEXIS®, a division of Reed Elsevier Inc. All Rights Reserved.



Louis Proyect

(http://www.panix.com/~lnp3/marxism.html)