CHINA: Economic challenges facing Congress
Updated
The economic issues besetting China's leadership would pose enormous challenges for politicians anywhere. In China they could prove to be impossible dreams.
Presenter: Karon Snowdon
Speakers: Russell Smyth, Professor of Economics at Monash University; John Gruetzner, Vice Chairman of the consulting firm Intercedent in Beijing
SNOWDON: China's next five year plan will continue many of the characteristics of the last one. Opening the economy, improving the environment, ending corruption and boosting the living standards of all China's people. The question is how to achieve this smoothly even with runaway economic growth. In his opening address, President Hu Jintao pledged to quadruple per capita GDP recorded in the year 2000 over the next decade. That's a significant increase from last time. He said this can be done by improving economic structures to boost economic returns while reducing the consumption of resources and protecting the environment. That's a big task and a huge turnaround from China's earlier "development at all costs" approach. John Gruetzner, Vice Chairman of the consulting firm Intercedent in Beijing, says in simple terms Beijing has to make China's economic growth more sustainable .
GRUETZNER: Obviously that's a massive commitment to growth and there's already signs of chasing round the edges in terms of resource costs, increasing difficulty to get export markets, and obviously the state's concerned about the over-investment in real estate and infrastructure, and therefore they're going to have to direct a greater interest in the consumers towards consumption. But they're having problems there because people are obviously worried about the pension deficits and challenges to the medical system.
SNOWDON: Pressures are building. Workers want higher wages and better conditions. Foreign investors want cheap labour for as long as possible. The estimated 150 million migrant workers who move from the countryside to the cities each year are less accepting of very poor pay and conditions. Russell Smyth, Professor of Economics at Monash University in Melbourne, says they have been the drivers of growth and now pose the biggest problem facing the central government.
SMYTH: If you read any of the circulars that have come out of this congress they speak in terms of providing protection for these workers. President Hu himself has championed the migrant cause in terms of paying wage arrears, but there's a big gap between what the centre says and actually what happens in practice.
SNOWDON: With wages on the rise, President Hu Jintao is hoping to direct manufacturing into more value added areas. Russell Smyth says he has to do it quickly.
SMYTH: China really needs to move into higher value added manufacturing now or potentially lose a lot of that investment offshore.
SNOWDON: China's central bank has been churning out regulations to cool rampant stock market and real estate speculation, but not much has worked so far. John Gruetzner says having opened the flood gates for private investment getting the balance right is a policy challenge.
GRUETZNER:To bring that back quickly under macro control is going to be very difficult for them, and obviously they're worried about over-compensating and not addressing the needs for new jobs and also for a national strategy to move people from the countryside to the cities.
SNOWDON: One of the issues not likely to appear in the new open Congress is the news that an extra 4 million people willl have to be relocated from areas affected by the massive Three Gorges Dam, the symbol in many ways of China's develpoment. That's on top of the one and a half million who have already been moved. Russell Smyth again.
SMYTH: It's a side of what's happening as of course the Chinese government doesn't want the world's attention to focus on that and probably there are a few other things like that that are going on. That's going to be just another issue that's sort of going to be ongoing over probably not just the next two to three decades, but probably well into the future.
