Introduction by CPI
Earlier, we posted an article on a recent visit to Shanghai and impressions of the changes taking place in the city and China as a whole. (See 'Shanghai rising' by Dr Lim Teck Ghee)
This wide-ranging and though provoking article aggregated below looks at the Chinese economy and what the future may hold for it. Although the article focuses on issues having to do with the relationship between China and the United States, it has insights that are important to policy makers in Malaysia and other developing economies striving to make sense of what is taking place in China and the lessons that can be learned to benefit their own societies.
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In China, cultivating the urge to splurge
By David Leonhardt
When the Wuqi International Hotel was completed this spring, it immediately dominated the modest skyline of Wuqi, a small city in north central China. The hotel stands 21 stories tall and is wrapped in gleaming gray metal, with two glass elevators running up the outside. On a recent stay there, I had a clear view of the nearby mountains from my 19th-floor room.
The hotel is part of an effort by local officials to reshape their city in ways that many economists, both inside and outside China, have been recommending for the country as a whole. The government of Wuqi (pronounced, roughly, Wu-tzi) offers more generous health insurance to its citizens than many places. Its schools are free all the way through high school, rather than through only ninth grade, as is usual in China, and have been the subject of admiring stories in the Chinese media. Over the last decade, the city has embarked on an ambitious tree-planting program that has brought green to the yellow-brown hills of the Loess Plateau, where Wuqi is located. The Communists ended their Long March in those hills in 1935, and the Wuqi International Hotel is meant to host tourists who come for this history.
The larger idea is to build a more sustainable economy, or what Chinese leaders have called a balanced and harmonious society. In that economy, families would not have to save 20 percent of their income in order to pay for schooling and medical care, as many do now. They would instead be able to afford more of the comforts of modern life -- better housing, clothing, transportation and communication. In time, China would become the world's next great consumer society.
That term may have negative connotations in the United States, particularly after the last decade of debt excess. But the term means something very different for China. A Chinese consumer society would improve the lives of hundreds of millions of people. The benefits of the industrial boom that began in the 1980s would spread more rapidly beyond the country's eastern coast. The service sector would grow, and the economy would no longer be quite so dependent on smoke-spewing factories.
For the rest of the world, the Chinese consumer is one of the best hopes for future economic growth. In the years ahead, when the United States, Europe and Japan will have no choice but to slow their spending and pay off their debts, China could pick up the slack. Millions of Americans -- yes, millions -- could end up with jobs that exist, at least in part, to design, make or sell goods and services to China.
Read the rest of the article in the New York Times of Nov 24.
