Deep concerns greet China’s rapid economic growth

Economic figures have now confirmed what analysts have long predicted would be the defining event of 2010.

After 30 years of spectacular growth, China is poised to overtake Japan as the world’s second largest economy and firmly establish itself as the leading source of global growth.

But the news has raised consternation along with pride at home as policy-makers, experts and ordinary people are piecing together conflicting signs of rapid growth, rising overcapacity, inflated property prices and continuing high unemployment.

While policymakers worry that China’s ascendance would give rise to more expectations of greater global management sharing, observers fret that the country’s economic rebounding over the last year has been accompanied by a very steady nationalisation of industries.

The public, for its side, grumbles that great-sounding economic indicators do not reflect the day-to-day reality for ordinary people.

On Christmas Day China reported revisions to official data that showed its economy was faster-growing and closer to displacing Japan as the world’s number two economy.

The National Bureau of Statistics said China’s 2008 gross domestic product was 4.52 trillion US dollars, narrowing the gap with Japan’s GDP of 4.9 trillion dollars for the same year. China’s economic growth for the year was revised to 9.6 per cent from 9 per cent.

“It is great to hear that China would soon be the economic leader of Asia, but how does this affect us?” asked Cao Jinling, a real estate consultant in Beijing.

“I deal in properties and I know that many people are excluded from the property boom. They can’t afford to buy even a single-bedroom apartment outside of the central business area of Beijing. Can we compare ourselves with people in Tokyo?”

Elicited praise

China’s extraordinary resilience to last year’s global financial woes has elicited praise from all quarters, but Beijing is increasingly worried that its stimulus measures could inflict long-term side effects on the economy in 2010.

To prevent a sharp economic downturn in the beginning of 2009, Beijing implemented a stimulus package of four trillion yuan (588 billion dollars), coupled with loose credit policy that has fuelled growth but also exacerbated existing overcapacity.

Foreign businesses have warned that the new investments funded by China’s stimulus plan may swamp world markets and lead to a surge in trade conflicts.

“China’s growth model requires that external demand – the European Union and the United States – be able to absorb the overcapacity it produces,” said a November report by the European Union Chamber of China, warning that given the weak economic recovery in the developed countries, this overcapacity was unlikely to be absorbed.

Yet China is adamant that next year, it will continue seeking a bigger share of global exports.