World recession sees China ascendant
Updated
While Asia's giant China is not immune to the world recession, some say it's actually accelerated China's rise in the global economic system.
Presenter: Sen Lam
Speaker: Professor Yiping Huang, adjunct professor in the Crawford School of Economics and Government at the Australian National University
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HUANG: I think that will be critical. We just heard about what is going to happen in the world economy and the whole world is going to have negative growth, that means demand for commodities will probably weaken also. But what we're hoping is that for the Chinese economy, it probably maintain around 8 per cent growth, not that the economy is not affected by the crisis, but the government has the political will and also capability in mobilising resources to support growth, particularly spending on infrastructure development. And when that happens, which we think growth probably will bottom around the first quarter of this year, and start to improve from the second quarter of this year, when growth start to pick up led by investment, that will provide some cushion or support for the Australian economy.
LAM: So in the medium to long term, you also think that China might emerge stronger, and even more influential out of this global downturn?
HUANG: I certainly think so. I mean, if you look at the last ten years, China's influence has already been on the rise, but this crisis and the recession itself just accelerated the ascendancy of the Chinese economy - ie, just look at the short term, the importance of the Chinese economy suddenly increases. Of course, the longer term will really would be depend on how successful China is in maintaining strong growth in the long run. But it does look like that ascendancy is accelerating. And the other side of the story I think is that this crisis probably sets off the new long term journey of a decline, of both the US economy and its dollar.
LAM: So do you think the Mandarins in Beijing are actually planning long term now; that their evolving policies is not a simple reaction to the current crisis, and a slowdown of demand for its goods?
HUANG: That's actually an open question. I mean I do think that the Chinese policy makers look at long term issues. They always look out for the very long term. But if you look at the policy responses, we are seeing at the moment, and particularly the fiscal stimulus package. I would have to say most of them still are responses to the crisis at the moment. So the purpose of these policies is much more about minimising the negative impact of the crisis of the near term, instead of facilitating the structural adjustment of the economy, so that the economy can grow much faster for much longer. And that is something I think we need to wait and see.
LAM: And Professor Huang, I understand that you once served at the Research Centre for Rural Development of the State Council in Beijing. Are there signs emerging now of the countryside being hit hard by China's economic crisis?
HUANG: Well, yes it is hit hard, mainly because the migrant workers that are coming from the countryside, working in the cities the last few years and many of them are losing jobs and so they have to go back. The official estimate is that something like 20 million people will no longer have jobs in the new year, so they either will have to stay somewhere or most of them will go home and I think that will be a big impact. At the same time, one possible benefit we saw last couple of years, the rising food prices and a rise in agriculture prices, that's actually also disappearing, because of the weakening of overall economic activity. So we just had the February CPI number for instance, it was negative. And so that would also hurt farmers' income. But I think at the same time, one last point - the government is actually paying a lot of attention to the well being of the farmers and they introduced a number of measures to support farmers' income, including abolishing all agricultural taxes, spending money to expand the free education system, to establish the health care system. And this year they also introduced a new system to subsidise farmers' purchase of electronic goods. So there are also some help coming through, in the rural area.
