Chinese growth may not be so great in the long term

China's exports are rebounding. Tens of thousands of laid-off workers are being rehired. Stocks and real estate have been on a tear.

But while economists credit Beijing's policies for carrying the country through the worst of the global crisis, some question the sustainability of China's recovery. Some say too much of the nation's growth is coming from investment in inefficient state-owned enterprises and that current stimulus policies are diverting the country away from the reform long needed to balance its economy.

“They're moving the economy in exactly the wrong direction,” said Yasheng Huang, a professor at the Massachusetts Institute of Technology's Sloan School of Management and a leading critic of China's economic strategy. At the heart of China's recovery is a US$585 billion government stimulus package and a torrent of new bank loans totaling US$1.27 trillion this year. The injection has kept industry humming, maintained employment at reasonable levels and launched billions of dollars worth of public infrastructure.

Beijing has also increased spending on health, education and pension plans. To stimulate domestic consumer spending, the government has offered subsidies for purchases of fuel-efficient cars and home appliances.

But some complain that those policies still favor large government-owned companies at the expense of small businesses in the private sector.

“Most banks only lend to those big state-owned companies that don't need it,” said Liu Lin, a sales manager at a small, privately-owned aluminum company in Southern China. “For an entrepreneur, it's almost impossible to get start-up capital.”

Officials in recent weeks have warned against overcapacity in 10 key industries, including steel, aluminum and even green technology such as wind turbines. China will be looking to unload excess production in foreign markets, which could worsen already tense trade relationships. The U.S. and China have wrangled over tires, chicken and auto parts in recent months. The U.S. is now investigating Chinese imports of steel pipes for evidence of dumping and subsidies.

1|2|Next Page>>

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email