Brad DeLong's Semi-Daily Journal (2004)

What's Going on in China?

Simon of Simon's World reads the Economist:

Simon World: The downside of growing up, China version: The Economist has a full court press (pun intended) of articles on China this week. The general theme is that China's rapid growth in the past 25 years has seen immense wealth creation and a rise out of poverty for hundreds of millions. It has also seen the creation of a middle class and a population that is learning to deal with both wealth and the greater reliance on themselves rather than the state. There is, however, a cost and the magazine looks at two of them in detail: the collapse of health care and the threat of pollution.

The collapse of health care seems overblown: for many in China, especially in more rural areas, there is no health care to collapse. What is more likely is the state is stepping out of providing it and the private sector is rushing in. It is typically chaotic, like much of China's economic transformation, but it is not at a crisis point. In fact the article itself points out that last year's SARS scare, combined with the growing threat of AIDS, is making China's health authorities more aware of the importance of adequate health care. As mentioned above, Chinese people are learning that part of growing wealthy is providing for oneself rather than relying on the state to provide. Health is one part of that.

The pollution story (no subscription required for this one) is altogether scarier and a bigger issue. China has paid little regard to pollution throughout its rapid industrialisation and prior to that. Indeed some of Mao's policies could be argued to be the greatest man-made environmental disasters ever (not to mention human disasters too). Like China's problems with its banks and bad loans, the race for growth had consequences that until were never addressed because they weren't seen to be immediate problems. This allowed them to grow and now they are reaching the point that something needs to be done. The cost will be large. But like many of the Western economies of today, the gathering of wealth comes first and dealing with the consequences comes once they can be afforded.

There are two further articles. The first looks at China's powerful bureaucrats and a recent lawsuit they lost over a trademarks dispute. People are getting excited because it may be the first time the CCP has lost a case to a private firm. It is being hailed as potentially the start of a move towards rule of law in China as judges become "more emboldened" to enforce laws against self-serving departments. Don't bet on it. The CCP is not prepared to loosen its control over anything and will not generally accept judges getting in its way. It may well allow certain judgements like this to stand, as this particular case seemed clear-cut and in breach of China's new WTO obligations. But China is run by the CCP without the normal checks and balances of a judiciary upholding the force of law.

The final article looks at China's dodgy economic figures. This is something they and I have looked at previously and remains a huge problem for what is becoming a huge economy. China is difficult enough to run as it is without worrying if the numbers are telling the real story. To some extent it is always going to be difficult to collate accurate numbers for a country as vast and big as China. However it is vital for China itself to at least attempt to improve the veracity of the economic statistics they publish. It's impossible to steer the boat if you don't have an accurate compass.