China announced on November 9,2008, an economic stimulus programme amounting to US $586 billion to be spent over a period of two years. The announced sum represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006. Most of the allocated amount is proposed to be spent on new housing, new infrastructure, agriculture, health care and social welfare. It also includes a tax deduction for capital spending by companies. China’s stimulus package is substantially higher than that of the US ( US $ 168 billion), Japan (US $ 51.5 billion largely in the form of payouts to families and tax reliefs to business companies) and Germany (US $ 29.9 billion mainly tax reliefs and loans). The Chinese contention is that the best way they could contribute to re-stabilising the global economy is by a substantial increase in expenditure in those sectors such as housing and infrastructure, which would create new jobs at home and, at the same time, maintain a high level of imports of raw materials and other items such as minerals and metals required for this purpose.
China’s financial system remains largely unscathed by the global credit squeeze, but prospects for the country’s continued rapid growth have quickly deteriorated. Export orders from the U.S., Europe and Japan are weakening, causing factories around China to trim work forces or shut down entirely — leading to unemployment that could undermine popular backing for the Government. Urban consumers are pulling back from China’s housing market, causing new construction to collapse to its worst level in a decade. With construction weak, support for other key industries such as cement and steel has declined, and they are cutting output and canceling orders for raw materials — moves that are being felt by commodities firms around the world. The downward spiral in confidence is likely to depress growth even further.
The Government is presenting the program as an opportunity to do many things that would be worth doing anyway. These include helping companies upgrade to higher-tech equipment, improving irrigation in rural areas, raising pensions and social-security payments, and improving water and waste treatment in cities.
Shortly after unveiling the economic stimulus plan, China is now turning its attention to managing the more intractable social fallout from the downturn —- growing discontent fuelled by rising unemployment. The policies range from setting up a fast-track system to nip labour disputes in the bud, providing financial aid to firms to help them retain workers, improving job search services for rural workers and clearing a backlog of sensitive court cases. ‘The root cause of unhappiness is unemployment. Without a job it is hard to survive in China because of weak social protection,’ said Professor Hu Xingdou, an expert in economics and China issues with the Beijing Institute of Technology. He added: “If leaders want to defuse tensions, they must solve the job problem.” China’s official urban unemployment rate was currently about 4 per cent, but could hit 4.5 per cent by the year-end. Even before the current crisis, China’s 24 million urban job-seekers outnumbered new jobs two to one. With even fewer jobs next year, the fierce competition among the country’s university graduates, for instance, is set to intensify. The authorities are concerned that they could be the biggest source of unrest.
Already, there have been isolated protests by workers over unpaid wages at shuttered factories. But of increasing concern for the Chinese Communist Party is the widening scale of unrest and scope of issues that are fuelling public dissatisfaction. In recent weeks, taxi drivers upset over falling incomes have staged strikes in at least three Chinese cities, including Chongqing. Earlier last week, a two-day protest over home demolitions in Gansu province left more than 70 injured.
China’s Communist Party has long been obsessed with social stability, concerned that any type of protest could escalate into a major challenge to its 59-year rule. The Ministry of Land and Resources, meanwhile, announced it would increase compensation for farmers’ land from 2009 “to guarantee the lawful rights of farmers whose land has been taken”, in a statement on its website on November. Government-backed “land grabs” are a common occurrence in China and have sometimes fuelled violent protests as owners of the properties are forcibly moved away to make way for new developments.
Statistics from the Chinese Customs indicated that during the first nine months of this year, China’s textiles and clothing exports touched $136.94 billion, a rise of 8.1% over the same period of 2007. But the growth rate is 11.9 percentage points lower than that of the corresponding period of last year. The latest statistics issued by the China National Tourism Administration (CNTA) indicate that in September 2008, there were 1,883,300 international tourists to China, down by 15.10% compared to the same period of last year. According to the analysis of CNTA, due to the series of serious natural disasters and “unexpected incidents” that took place in China this year, the Chinese tourism industry has been affected to a certain degree. Also, the global financial crisis has had an adverse impact on tourism.
