Stanley's blog

The atmosphere in this week’s annual Central Economic Work Conference, held in Beijing, was the reverse of last year, when Premier Wen Jiabao succeeded against opposition in adhering to tightening credit. This year, Wen Jiabao and his colleagues have decided to invest an additional 4 trillion yuan before 2010. This decision has not been universally welcomed. People’s reaction on the Internet is suspicious. How much will benefit corrupt officials, despite the strengthening of supervision by the Central Commission for Discipline Inspection?

The Conference is an important mechanism for the higher levels of the Chinese Communist Party to reach a consensus on economic policy for the coming year.

There has also been criticism from the elites. Hu Deping, son of Hu Yaobang, published a signed article in the latest issue of Nanfang Zhoumo [Southern Weekend] entitled “Causes and countermeasures of the financial tsunami.” He points out that “Over the past 30 years, China’s GDP grew 67-fold, but per capita national income increased only 12-fold; the state’s public expenditure is also far from ideal: this ratio, however stated, can’t be considered well-balanced.”

Hu touched on the crucial issue of how hard it will be for the 4 trillion investment to increase citizens’ consumption. In his article on “The financial crisis and building a better society in China,” Zheng Yongnian [Director, East Asian Institute, National University of Singapore], has expressed his disappointment with Premier Wen Jiabao more directly. He accuses Wen, like Zhu Rongji in times past, for investing a lot of money in infrastructure instead of building the social security system, or spending money on the people and so once again missing a great opportunity for social reform. Zheng states: “Money is needed for China’s social reform, and the Central Government has plenty of it, but is neither willing not able to spend it. This is a very sad thing.” It is interesting that Zheng’s article was reprinted in Cankao xiaoxi [Reference News] making it accessible to millions of Chinese readers.

From another angle, the influential economic commentator Ye Tan criticises the harm Premier Wen’s 4 trillion investment would do, namely, it would continue to suppress the development space of private enterprise. Miss Ye’s op-ed, “30 years of private enterprise: slipping through gaps between SOEs and foreign invested firms” gives a cogent account of how private enterprise has never been given a normal living environment in the CPC’s 30 years of reform and opening up, while “Central and local SOEs and large-scale foreign invested firms were given institutional transfusions in the form of distorted resource allocations, including energy, finance, taxation, and legal regulation, destroying the basis of endogenous competition.” As a result, the relationship between the private and public sectors enterprises is incestuous.

Zheng Yongnian questions why the CPC is always unwilling to spend it on the people? Is it because this does not suit the interests of the bureaucracy? Confucius said long ago, “Worry not about scarcity but about uneven distribution”. A provocative view is that uneven distribution of wealth is more threatening to a régime than less wealth more equally spread.

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