Re: [Pen-l] China's downturn

[raghu <mraghu01@xxxxxxxxx>]

On Sun, Apr 19, 2009 at 8:04 PM, Marv Gandall <marvgandall@xxxxxxxxxxxx> wrote:
> b) The left-wing fallacy that China has simply become an export-driven
> appendage of US capitalism. The article serves up the reminder that "China
> is less dependent on exports than is commonly believed", and that it's
> downturn, while exacerbated by the collapse in global trade, preceded it and
> resulted from mainly domestic contradictions - notably, it's own home-grown
> property bubble and subsequent state-induced bust. "If a collapse in
> domestic demand led China’s economy down, it can also help lead it up
> again", it concludes - largely independent of the course of developments in
> the older capitalist economies.


Here's a dissenting view - by a very well-informed and intelligent
observer. The gist of it is far from addressing the imbalances, the
Chinese government seems determined to boost export-oriented
infrastructure spending instead of domestic consumption. And yes,
there are imbalances. While China's export dependence may be
exaggerated, the 8% value-add share for exports may be misleading in
the other direction i.e. fail to include "domestic spending" that is
really little more than export subsidies.

http://mpettis.com/2009/04/this-is-getting-tiresome-so-please-let’s-declare-the-crisis-over/
-------------------------------------------snip
I guess it is hard to take forecasts seriously when they seem to
fluctuate so directly with the most current numbers, but given the
history of previous long crises – everyone of which had more than one
temporary rebound, sometimes very sharp, on the way down – I would be
reluctant to declare my optimism without a lot more data and a real
sense that the underlying imbalances had truly been resolved.


I am pretty sure this hasn’t happened yet. On the contrary, I would
argue that the temporary “rebound” (which seems more to be a slowdown
in the rate of contraction than a real rebound) has probably been
caused by little more than policies aimed at temporarily exacerbating
the imbalances, and as such they are unlikely to have a long term
impact.


In that light a friend sent me information reported in an April 15
article (“Henan: 1 trillion investment to create 650,000 jobs”) in the
21st Century Business Herald, a leading local business paper, that
Henan province will be receiving RMB 1 trillion as part of the
stimulus package and, according to the Henan Development and Reform
Commission’s calculations, these key projects will only generate
650,000 jobs. Aside from the fact that the combined announced spending
in the various provinces seems substantially to exceed the declared
stimulus package, this really isn’t a lot of jobs for a province the
size of Henan.

More worryingly, I work out that if the money was just spent on
workers to give them wages of RMB 3,000 a month (probably more than
twice what migrant workers make and a decent salary for college
graduates in Beijing), RMB 1 trillion could pay salaries for 650,000
workers for 43 years.

This is not an efficient way to generate jobs. If these numbers are
even vaguely correct it suggests that far more of the money is going
into manufacturing and infrastructure investment than into job
generation. This is not going to boost consumption by much in the
short term and may boost production by at least as much, leaving
unresolved the question of who is going to absorb the excess capacity
if the US is not longer willing to play the role.





-raghu.


--
Never get into fights with ugly people, they have nothing to lose.
_______________________________________________
pen-l mailing list
pen-l@xxxxxxxxxxxxxxxxxx
https://lists.csuchico.edu/mailman/listinfo/pen-l