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Saturday, March 20, 2004Behind the mask - Economist view on ChinaHailed as the business opportunity of the century, China is bound to disappoint. Mismatch between excitable perception and sober reality is realChina needs 12m-15m new jobs every year just to keep pace with its population growth. It has to provide opportunities for the 800m people living in rural areas who have been left behind by the current boom, and a third of whom are under- or unemployed. It also has to deal with the 100m-150m migrant workers in the cities who have no job security, no long-term housing and no health care. And it needs a functioning pension system. No wonder the government is concerned, above all, with growth and job creation.In its quest for growth, the government has directed its state-owned banks to open the taps. Easy credit is producing massive overcapacity, leading to deflation, more bad debts and fewer new jobs. Already, nine-tenths of manufactured goods are in oversupply, yet investment in fixed assets last year grew by 30% and contributed 47% of GDP.the biggest concern is that China's growth is staggeringly wasteful. Whereas in the 1980s and 90s it took $2-3 of new investment to produce $1 of additional growth, now it needs more than $4. Even India, often compared unfavourably with China, is now more efficient on that measure. Looks quite insightful - But at the same time forced to ask - Are these sane words really sane- fifteen years back would the economist or any other publication predicted the growth and transformation that china has seen now - while sustainability could be a valid theme to discuss - can somebody overlook the opportuntiies and advantages that such untheoratical growth has provided several corporations and entrepreneurs with in the last 15 years. | |
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