Friday, October 24, 2008

China's Economy Has Ability to Recover From Slowdown

October 22, 2008
Xinhua News Agency

Experts attending a think tank strategic dialogue at the ongoing China-ASEAN Expo have shown confidence in China's steady economic growth despite the extensive downturn in the world economy.

China's gross domestic product (GDP) grew 9.9 percent during the first three quarters of this year, 2.3 percentage points lower than the same period of last year, the National Bureau of Statistics said Monday. China's GDP has grown with an annual average 10.6 percent since 2003.

Hadi Soesastro, executive director of Center for Strategic and International Studies of Indonesia, said that 9.9 percent is already a good achievement. "We could not simply think China's economy has sagged. China has made great achievements in improving the social interests for the public."

China has spent great amount of money on environmental protection, energy saving, greenhouse gas emission control and social welfare. The social interests and long-term effects are incalculable, he said.

"In consideration of the ongoing global economic crisis, 9.9 percent is still a good figure. China's economy is somewhat resistant to the outside impact and is easy to escape from a standstill," said Nguyen Van Nen, director of planning and promotion department of Vietnam Cooperative Alliance.

China's slowdown under the background of global recession is an opportunity for the country to readjust and transform, said Sheng Lijun, a researcher with the Lee Kuan Yew School of Public Policy, National University of Singapore.

"China should promote its technology innovation and transform itself from a traditional manufacturer to a modern industrialized country, setting a sound basis for its sustainable development," he said.

The weak demand in the West could make Chinese products oversupplied. The mounting protectionism also has a negative impact on Chinese economy, Sheng said. "China can invest in domestic infrastructure as well as that in ASEAN countries. The return is guaranteed."

"I think China's returning to a 10 percent growth rate needs two years at most. I am quite confident about that," said Tan Sri Mohamed Jawhar Hassan with the Institute of Strategic and International Studies of Malaysia.

The global market slipped into a recession in the 1997 Asian financial crisis and China also slowed down its pace. Chinese economy, however, gained a momentum soon after that and moved to a new high, he said.

"Now China's economic quality and the ability to recover is much better than 10 years ago. It will keep an 8 percent increase at worst," said Hassan.

China's steady growth is vital to the development of ASEAN countries. The China-ASEAN Free Trade Zone is expected to become the third largest free trade zone in the world in 2010 and the ties between China and ASEAN are set to become closer, said Nguyen Van Nen.

The close ties and strengthening cooperation between the two sides will definitely improve their resistance to the economic risks, he said.

"In the long run, I am optimistic about China's economy," he said.

China's Population May Hit 1.5 Billion in 2033

October 23, 2008
Shanghai Daily

The population on the Chinese mainland is expected to reach 1.5 billion in 2033, an official revealed at a forum in Beijing today.

The population will see an annual increase of about eight million people in the next decade and may reach 1.36 billion in 2010 and 1.4 billion in 2020, said Li Bin, director of the National Population and Family Planning Commission.

The number of people above the age of 65 is expected to reach 320 million by 2040, which will make up nearly 22 percent of the population. The elderly segment was only 8.1 percent of the population in 2007, Li said.

In addition to the pressures of a greyer population, the country will also battle a sex-imbalance that may seriously disrupt social stability, Li warned.

The sex ratio, or proportion of males to females, has been getting increasingly skewed since the 1990s as many Chinese couples show a strong preference for boys.

The ratio has reached 119.92 in 2000 from 108 in 1981, which means 119 boys are born against every 100 girls across the country, according to the National Population and Family Planning Commission.

In five provinces, the figure even surged above 130, the commission said. Analysts say a proportion of 106 boys for every 100 girls can be considered normal.

China will have a male population of up to 30 million in 2020 who may not be able to find wives and partners because of the gender imbalance, Xinhua news agency cited Li Weixiong, a member of the People's Congress and also deputy director of China Economy and Society Reach Committee, in a previous report.

Meanwhile, China is also expected to see its largest population mobilization when 300 million people enter urban centers in the next two to three decades, Li warned.

Faced With Global Slump, Can China Keep Up Economic Growth?

October 23, 2008
By: Jim Yardley and Keith Bradsher

For three decades, China has fueled its remarkable economic rise by becoming the world's workshop and unleashing a flood of low-priced exports. But faced with a possible global recession and weakening demand for Chinese exports, the question now is whether the ruling Communist Party can prevent the financial crisis from derailing the country's economic miracle.


This is a pressing question not just for China but for the rest of the world. Many economists say continued Chinese growth is vital to the global economy as the United States and Europe face severe downturns. Yet to navigate the crisis, many analysts say China will need to recalibrate its economic model, stoke domestic investment with heavy government spending and promote policies to increase consumer spending in a nation famous for high savings rates.

The global financial crisis is expected to be the main focus of a summit meeting of Asian and European leaders in Beijing this week.

It is also arising at a politically resonant moment for China. This is the 30th anniversary of the policy changes that propelled China's economic rise, a milestone that has raised inevitable questions about the future shape of reform. At the geopolitical level, China would seem well positioned to expand its influence as it sits on $1.9 trillion in foreign exchange reserves and could benefit from widespread calls to reorganize Western-dominated global financial systems.

But for now, most analysts say China's top priority is simply protecting its own economy. Chinese leaders say the domestic financial system is largely insulated from the global crisis but also warn of serious pressures at home and from abroad. Economic growth is at the lowest level in five years, unemployment is a growing concern and scores of factories are closing in the country's export region. Domestic stock exchanges have lost 65 percent of their value and real estate sales have plummeted.

Many economists believe China can avoid a serious downturn, but a significant slowdown would pose a political challenge for the Communist Party, which derives much of its legitimacy from delivering economic growth. Conventional wisdom holds that China's output must grow at a minimum of 8 percent for the economy to produce enough jobs to meet demand, and many economists expect growth to drop below that level next year.

Just last week, thousands of unemployed workers protested outside closed toy factories in Guangdong Province, the country's export hub. Slightly more than half the country's toy exporters shut down in the first seven months of this year, mostly very small companies that struggled to cope with new safety standards as well as weakening Western demand, according to China's customs agency.

If the growth rate "goes below 8 percent in 2009, I think they will be quite concerned," said Kenneth Lieberthal, a China specialist at the Brookings Institution in Washington. "They are always concerned about job creation."

Already, Chinese leaders are preparing a response that could resemble the government spending spree from 1998 to 2000 that is credited with helping China avoid the worst of the Asian financial crisis. Former Prime Minister Zhu Rongji poured billions of dollars into projects like flood control, road building and new airports to pump economic output. Much of that infrastructure is now considered essential to China's competitive advantage as a manufacturing exporter.

Today, improvements are needed in railroads and the electrical power grid. But China's most conspicuous needs are the softer side of a modern economy — a health care network, lower tuition and fees for schools and universities and improvement in the rudimentary social safety net, economists say.

Such steps are seen as crucial if China is to give consumers — especially working-class urban residents and the 800 million people still classified as peasants — the confidence to spend rather than increase their savings.

"China's infrastructure is excellent - compare it to India," said Xu Xiaonian, an economics professor at the China Europe International Business School in Shanghai. "It's getting harder for the government to find ways to spend money productively. It's stimulus for the sake of stimulus."

David McCormick, the U.S. under secretary of the Treasury for international affairs, said during a telephone interview that Chinese officials understood that the sheer size of their economy, combined with weakening demand overseas, meant increasing demand for goods and services within China would be in the country's own interest. "They can't count on exports being such a driver of their economy going forward," he said.

To date, the most significant new measure is the land reform announced Sunday after days of mixed signals. Full details of the program are still unclear, but the plan allows farmers for the first time to lease or transfer land, a landmark step in what is still nominally a socialist country. Economists believe the measure will lift the rural economy, though few predict sudden benefits. To raise rural incomes more rapidly, the top Chinese economic planning agency on Monday increased the minimum purchase price of wheat by up to 15 percent beginning next year.

But transforming the countryside and creating a nation of consumers is likely to be a more difficult process than China's transformation into a manufacturing giant. In recent years, President Hu Jintao and Prime Minister Wen Jiabao have eliminated the ancient agricultural tax and increased spending on rural initiatives. Yet the rural-urban income gap has continued to worsen. Today, China still has more than 500 million people living on less than $2 a day; nationwide per capita income is only about $2,000. The social safety net remains so inadequate that most peasants save their spare earnings to protect against a medical crisis or as a thin cushion for old age.

Andy Rothman, a longtime analyst at CLSA Asia-Pacific Markets, an investment bank, said that the government had been promoting domestic consumption for years but that by necessity it was a gradual process and not one that could provide a quick fix to a global slowdown.

"This isn't something you want to move ahead at light speed," Rothman said. "China trying to step into the breach by handing out credit cards to 800 million peasants would be a disaster just a few years down the road."

From a geopolitical standpoint, China would seem to have an opportunity to fill a void created by a weakened West, especially given the country's huge foreign exchange holdings. President Asif Ali Zardari of Pakistan visited Beijing earlier this month in search of financial edge to help his country stave off bankruptcy - an overture that could become more common as China is increasingly perceived as sitting on a money pot.

More pertinent to the United States is whether China will re-examine its strategy of financing U.S. debt. Chinese experts say that the American and Chinese economies are so intertwined that Chinese leaders will not make any abrupt changes in its policy of directing the bulk of its foreign currency reserves to dollar-denominated assets. Indeed, the U.S. Treasury secretary, Henry Paulson Jr., and other senior U.S. officials have been in almost daily contact with their Chinese counterparts.

"China, with the responsibility of a big country, will not make trouble for international financial markets," said Hu Angang, a Chinese economist who is the director of the Center for China Studies at Tsinghua University. "The Chinese government is very rational and flexible, and very clearly recognizes any policy does not just influence domestic markets but also global markets."

McCormick said that U.S. officials had not asked their Chinese counterparts to buy any specific portion of the Treasury bonds that would be issued to finance the Bush administration's $700 billion economic recovery plan. But U.S. officials have tried to impress on Chinese officials that the United States remains an attractive place to invest.

"We've certainly tried to give them confidence we're taking the appropriate policy steps," McCormick said, adding that the United States had also encouraged China to continue to be "a stable and long-term investor in the global financial system."

Some Chinese experts are suggesting that China could use more of its foreign reserves to purchase stocks in Western companies and even leverage positions onto corporate boards. Doing so, these experts say, would allow China to develop expertise and gain more experience in global business.

But others say China was stung by the backlash after a state-owned Chinese petrochemical company sought to purchase Unocal and would be cautious in making any moves deemed politically risky. Domestic pressures also exist; public criticism has erupted after some investments by the country's sovereign wealth fund lost money.

McCormick said that the United States welcomed investments by sovereign wealth funds, whether from China or any other country.

No one is yet certain when the global financial system will stabilize, but the crisis has convinced many economic analysts that the system itself will be re-examined. The financial crisis is "a ground-shaking event, but people are going to stick to the same system," said Wang Tao, chief of the China economic research unit for UBS Securities. "But they are going to think about how to reform the system, and China will probably have a stronger voice than before."

In recent years, some Chinese experts have written analyses about the inevitability of an American decline and how China must prepare to manage it. But in the face of the current crisis, most Chinese analysts say China is nowhere near ready yet to stand as a superpower.

"China doesn't want to be viewed as a replacement for the States," said one Chinese scholar who requested anonymity so that he could discuss the mind-set of government officials. "We are still a developing country. We have more foreign reserves than other countries, but we also have more problems."

China's Next Test: Health Care

October 20, 2008
Reuters

China's economic boom has resulted in stark inequity between its urban and rural populations in terms of health, and experts urged the government to work harder at providing health care for everyone.

Infant mortality in China's countryside stands at 123 for every 1,000 live births compared with 26 in the richest counties, the experts wrote in a paper published in The Lancet medical journal.

Of every 1,000 children, 64 in the countryside will not live beyond their fifth birthday, compared with 10 in the cities.

The report, by researchers in China, the United States and Britain as well as from the World Health Organization, is part of a special series on China's health reforms.

While life expectancy in Shanghai is 78.1 years, that figure is 66.1 in Gansu, one of the poorest provinces.

The team of experts also highlighted China's "missing women."

"In China, the problem has been exacerbated in recent decades by the practice of sex-specific abortions," the experts wrote.

The report continued that "discrimination lasts through infancy and childhood, reflected in higher death rates for girls."

"In 2000, infant mortality was 33.7 per 1,000 live births for girls compared with 23.9 per 1,000 for boys."

The authors attributed the disparities to inadequate government investment in health care, which increased "out-of-pocket" costs, hitting the poorest the hardest.

There was also insufficient government stewardship, which resulted in "doctors using their knowledge to prescribe inappropriate yet profitable procedures and drugs."

Another paper in the series highlighted the preference among medical and health care graduates for joining pharmaceutical and biotechnology companies instead of the medical profession, where they are needed.

This paper, led by Sudhir Anand of the University of Oxford, estimated that one million such graduates between 2000 and 2005 were not absorbed into the country's health care workforce.

"Although the production of doctors and nurses has greatly expanded in recent years, serious problems of distribution remain," the experts wrote, adding that "the goal of its health reform should be to promote equitable and universal access to basic health services."

Another paper highlighted how health care was taking up the bulk of household incomes, or a whopping 50 percent in 2006 (more than 18 times that in 1990) because of inadequate health insurance.

This compares with 45 percent in South Korea, 16 percent in Sweden, 15 percent in Japan and 11 percent in France.

"The average cost of a single hospital admission is now almost equivalent to China's annual income per head and is more than twice the average annual income of the lowest 20 percent of the population," wrote the team, led by Hu Shanlian from Fudan University in Shanghai.

"More than 35 percent of urban households and 43 percent of rural households have difficulty affording health care, go without, or are impoverished by the costs," they wrote.

The papers noted recent moves by the Chinese government to modernize the public health system and introduce health insurance plans, but much more needed to be done, especially to raise the level of reimbursement and help people who live in poverty.

Another Lancet report warned that chronic illnesses like cancer and heart and respiratory diseases were time bombs, and that the Chinese should reduce their intake of fatty foods and salt, stop smoking and start exercising.

Increasingly affluent Chinese consumed between 25 and 100 percent more fat each day in 2002 compared with 1982, sharply raising the risk of heart disease and cancer, the experts wrote in The Lancet.

While the country was plagued by infectious diseases before 1990, chronic illnesses are now the main health problem and accounted for 74.1 percent of all deaths in 2005, up from 47.1 percent in 1973, the researchers wrote.

While these chronic illnesses have to do with people living longer, several high-risk factors are also involved.

Apart from a fatty diet, many Chinese consume a relatively high 12-gram dosage of salt daily, which the paper said accounted for hypertension in about 177 million Chinese adults.

Based on Chinese definitions, 22.8 percent of Chinese were overweight in 2002. About 7.1 percent in the population were obese in 2002.

The paper also drew attention to the smoking habit of many Chinese.

"One in every three smokers in the world is a Chinese man," the experts wrote. They reported that cigarette consumption increased to 2,022 billion in 2006, to a level 17.4 percent higher than in 2002.

The average Chinese male smoker smoked 15 cigarettes a day in 2002, up from 13 in 1984.

The costs of China's disease burden from smoking were likely to be vast, and China will suffer reduced productivity and more premature deaths, the researchers warned.

"Hypertension and tobacco can be targeted health priorities," wrote the team, led by Yang Gonghuan of the Chinese Center for Disease Control and Prevention in Beijing. "Reduction of salt intake should become a national campaign."