Garnaut references Huang Yasheng, a professor at Massachusetts Institute of Technology and the author of the the recently published book Capitalism with Chinese Characteristics in his article.
Huang Yasheng estimates that government and corporate consumption has likely increased from 10 per cent of retail sales in the '80s to between 25 and 30 per cent since the mid '90s. Household consumption has fallen correspondingly buy cialis.
The National Bureau of Statistics reported that China's retail sales growth was 17 per cent after adjusting for falls in prices.
Gordon G viagra online. Chang, a weekly columnist for Forbes and author of The Coming Collapse of China disputes this statistic as well as the reported growth figures and argues that chances are high that the government simply bought these “retail items” and either stored them in warehouses or parked them in State parking lots cheap cialis.
[I]t is unlikely that 3Q expansion was anywhere near the claimed 8.9%. This claim is not consistent with other statistics. The economy, for example, is still dependent on exports: Before the massive government spending, about 38% of GDP was attributable to sales abroad. Yet exports tumbled 23.0% in July, 23.4% in August and 15.2% in September. Another important indication of slowing activity was the third-quarter drop in imports. They fell 14.9% in the first month of the quarter,17.0% in the second and 3.5% in the last.
And what took up the slack? The other two legs of the economy are, of course, investment and consumption. On consumption, retail sales, a crucial indicator of activity at China's shops, zoomed up during the last quarter, increasing by no less than 15.2% in any of the three months of the period.
There are fundamental problems with this key statistic, however. First, Beijing includes government purchases in the number as well as goods shipped from factories but not yet sold to consumers. Because the retail sales figures include these extraneous items, it is no wonder they do not correlate with statistics showing consumer price declines in each month of the July-September period--down 1.8%, 1.2% and 0.8%--plus increases in M2 in all three months. In September this broad measure of money in circulation jumped 29.3% after increasing 28.4% and 28.5% in the two prior months.
Because these numbers are consistent with trends evident throughout the year, we have to ask a simple question: How can a country have robust consumer sales, nagging deflation and rapid monetary expansion all at the same time? One reason is that vast quantities of consumer goods are now sitting in warehouses.
Beijing, in the 1990s, ordered factories to churn out goods in periods of low demand, and there are indications that officials are resorting to this tactic now. While optimistic analysts point to astounding car sales--up 70.5% in July, 94.7% in August and 83.6% in September--there are reports that central government officials have ordered state enterprises to buy fleets of vehicles and that these businesses are storing them in parking lots across the country. These stories are as yet unconfirmed, but they are consistent with statistics showing that gasoline sales have been flat this year--up only 6.4% in August, for instance, and sliding since then from all indications. So here's another question: At a time when economic activity is supposedly rising at a quick pace, how can large increases in passenger vehicle sales not be accompanied by corresponding surges in fuel usage?
Therefore not only is the reported GDP growth rate of 8.9% for the July to September period suspect, but also the reported retail sales growth of 17%.
Chang's critique of the figures supports Huang's dismal protrayal of Chinese household consumption.
Between 2000 and 2007 household consumption fell from 47 to 33 per cent of GDP, according to data. That's less than half the household consumption share in the US and Australia and more than 20 percentage points below Japan, Korea, India, Brazil and South Africa.
This year the vulnerable Chinese household consumer has become more so.
Social spending has increased but it has been surpassed by torrents of money being channeled to state-owned companies and their favored construction projects. "China may be wasting their crisis opportunity to engineer needed structural change in the economy," says Huang.
According to Huang since the start of the financial crisis the following has occurred.
- households have increased their consumption, but not nearly as fast as government and (mainly government-controlled) corporations.
- the state may have increased its consumption by between 30 and 40 per cent.
- household consumption has probably fallen to a world-record low of about 30 per cent of GDP.
Huang's conclusion: The economy operates for the benefit of developers and producers and the bureaucrats that feed off them.
What does Huang think China should have done?
Spend the stimulus package on programs that raise household income and therefore consumption.
Maybe they should declare a moratorium on production for a year and pay peasants to walk around for a year, exercise, without adding to supply.
The result: the state spends an ever-increasing share on what China least needs.
It's all absolutely the same: building absolutely wasteful buildings, more opera houses, more Terminal 3's [Beijing's new airport] and CCTV towers. These buildings would never have been built in the '80s, not because China was poor but because the government was poor. Now the view is that 'anything we do increases GDP, so what's the problem'?
Huang like many other China watchers comes to think that the political system is incapable of welfare-building reform. The self-interest of China's bureaucracy and state-controlled monopolies conquers all in Chinese society. The State has grown in size because in the 90's they only had to make “the bureaucracy and state monopolies happy.” Now they must “make the local bureaucrats happy.”
Huang conjectures that the strength of the bureaucracy continues to grow because of 1989 and the fall of the Berlin Wall. China's political elites learned that political reforms were absolutely disruptive and destabilizing.
If you think political reforms are about imposing disciplines on the power of the bureaucracy, then you strengthen them, you give them more money. You give them incentives and the license to benefit on the side.
Now the explicit government salary is higher and the implicit salary is astronomically higher. And the only way to justify this is to increase their power. Urban planning, technology parks, even the administration of social programs. A better way would be to give welfare debit cards directly to peasants, like in Brazil, because that would bypass bureaucrats.
I worry that corruption is getting worse. The amount of money is astronomical. Top-down crackdowns on corruption don't work because they are always tainted by politics. The lesson is not to be not corrupt, but to be corrupt and politically smart about it, with the right people.
It's a fascinating question: why you encourage blatantly dishonest, absolutely corrosive and economically destructive behavior. Is it sustainable? I don't think it is.
The lives of household consumers are likely to get worse, and the State is likely to get fatter. But the economic and political house of cards that they are building is not likely to persist indefinitely. Something has got to give. When and how remains to be seen.
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