Economics and China

[kandrathe]

Hey, a new year, a new plan.

Central planners in China embracing "supply-side" economics.

China will focus more on “supply-side” policies designed to encourage private business and unleash innovation and demand in the next year, officials said after a meeting of the country’s top leadership Monday. The measures, designed to tackle the recent slowdown in the country’s growth, call for allowing more out of date state companies to go bankrupt, less red tape for new enterprises, and a proposal to sell off unsold housing in China’s cities to migrant workers from the countryside.

I think one area of major concern is the glut of unoccupied property.

HSBC Greater China Economist Julia Wang said in a report last week that China had unsold housing inventory of 1.8 billion square meters, which could house up to 90 million migrants from rural areas. China has already said it plans to "urbanize" 100 million rural residents by 2020, and Wang said a speeding up of such housing sales could have a significant impact: she said the slowdown in China's real estate investment had shaved “at least 1 percentage point off [its] real GDP growth” this year.

Which begs the question, "If the migrant farm workers move to small cities, where will they work?" Since it is these same small cities that suffer the brunt of unemployment, and economic malaise. There is also the entrenched Hukou system of inequality disenfranchising the rural "low caste".

Since the 1980s, an estimated 200 million Chinese live outside their officially registered areas and under far less eligibility to education and government services, living therefore in a condition similar in many ways to that of illegal immigrants. The millions of peasants who have left their land remain trapped at the margins of the urban society. They are often blamed for rising crime and unemployment and under pressure from their citizens, the city governments have imposed discriminatory rules. For example, the children of farm workers (Chinese: 农民工; pinyin: nóngmín gōng) are not allowed to enroll in the city schools, and even now must live with their grandparents or other relatives in order to attend school in their hometowns. They are commonly referred to as the home-staying children. There are around 130 million such home-staying children, living without their parents, as reported by Chinese researchers.

Hopefully, as China sheds its repressive and inhumane legacies under totalitarianism, now authoritarianism, it can begin to give every citizen equal rights and privileges.

A China scholar, Dr. David Shambaugh (沈大伟), in a 2014 article China at the Crossroads: Ten Major Reform Challenges listed what he believes will define China's actions in the years to come. He caveat's

It should obviously be noted that the ten areas I identify as priorities are those of a foreign observer who defines China’s challenges differently from the government and Communist Party of China (CPC).

The ten major reform challenges he identified in this paper from October 2014 were,

1. Economic reforms
2. Fostering Innovation
3. Reducing social inequality and instability
4. Combating corruption
5. Undertaking political and legal reforms
6. Fostering urbanization
7. Improving the environment
8. Building China's cultural industries and international soft power
9. Improving the military's combat effectiveness
10. Managing foreign relations

He specifically mentions in the section on economic reform, "Relaxing or lifting hukou restrictions and creating a true national labor market while alleviating the burden that migrants place on municipal governments." This is also tangential to #3, reducing social inequality.