Thursday, 5 March 2015

Is China Changing Tack?

Premier Li Keqiang in the Great Hall of the People today
World markets were watching for the latest signals from China, and today Chinese Premier Li Keqiang delivered it -- a sombre economic growth target of 7 percent.

This is different from 2007, when then premier Wen Jiabao who pronounced China needed to sustain 8 percent growth to keep people employed and factories humming.

But 2015 is a stark change from the eve of the Summer Olympics and announcing China's rise. Now it's putting on the brakes after sustaining increasing growth for 25 years.

While countries around the world that depend the yuan to prop up their economies may be dismayed (the United States is probably first in line), slowing down China's economy is necessary.

Back in 2009, Wen and then president Hu Jintao had an opportunity to use the global economic slowdown to clean up China's own house financially, but instead threw 1.5 trillion yuan at the problem.

Mostly state-owned banks were forced to shell out the money -- and this led to even greater graft and corruption, and financial institutions are still having trouble collecting their debts.

"The downward pressure on China's economy is intensifying," Li said. "Deep-seated problems in the country's economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year. The new year is a crucial year for deepening all-round reforms."

So is Li really going to implement serious economic reforms this time around? He and the Chinese government cannot procrastinate any longer. There are many bloated state-owned enterprises that need to be restructured, and it's not always merit that wins out... people, especially those in senior positions will have to battle it out in seeing who has the better guanxi...

Chai Jing gives her findings about pollution in China
Meanwhile slowing down the economy also hopefully means less pollution. A few days ago former CCTV presenter Chai Jing released her documentary Under the Dome, where she chronicled China's pollution and how she believes it affected her daughter's development in the womb, as the baby was diagnosed with a lung tumour.

There's been lots of talk about this independent investigation that Chai spent 1 million yuan in making, as it reveals how it is the rich and the government who are making 1.3 billion people sick one way or another.

The general public don't want break-neck development at the cost of their lives -- they too want to have blue skies, clean water and a healthy environment for their children to grow up in.

So will the Central government pay attention to the desires of the people and give them what they want? By doing this it would mean stability of the Party, no?

Finally Li reiterated that the crackdown on corruption is here to stay, pouring cold water on those who thought it was a temporary campaign.

"Our tough stance on corruption is here to stay," he said. "Our tolerance for corruption is zero, and anyone guilty of corruption will be dealt with seriously."

The hunt for tigers and flies continues... is anyone completely clean in China?

2 comments:

  1. "...and financial institutions are still having trouble collecting their debts...."
    A couple of questions here: who EXACTLY are the LENDERS & BORROWERS of these bad debts? TNX for any answers or leads -- they would help with investment portfolio analysis.

    ReplyDelete
    Replies
    1. Hi Anonymous -- the lenders are state-owned banks (ICBC, Bank of China, Communications Bank, etc). Borrowers are again state-owned enterprises, infrastructure projects from highways to property developers. That is why Ordos in Inner Mongolia is a ghost town, and lots of money ended up in Macau...no one knows the exact money trail. If we did all the tigers and flies would have been captured by now.

      Delete