By Wieland Wagner
The party has also been dispatching its officials to visit companies throughout the country. Part of the purpose of these visits is to determine which companies need government support. At the same time, the party officials have begun pressing local company managers not to let any workers go or close factories -- a trend that triggered an initial wave of angry protests around the end of last year.
At first, the crisis took the party by surprise in Guangdong Province, China's export powerhouse in the Southeast, bordering Hong Kong. When thousands of privately owned factories that produced inexpensive products like shoes and toys were shut down, about 20 million migrant workers throughout China lost their jobs. But local party officials made sure that the newly unemployed were paid back wages.
In Shanghai, the Communist Party's crisis managers are virtually omnipotent. In this city of skyscrapers, communist city officials control the most important large companies, from supermarket chains to China's biggest carmaker. Recently, the city spent 1 billion yuan to quietly rescue SVA, a local flat-screen TV manufacturer, from bankruptcy. "The party is the key to overcoming the economic difficulties," says Yu Zhengsheng, the head of the Communist Party in Shanghai.
The collective goal of China's economic planners is to achieve 8-percent growth, which the Beijing leadership sees as the minimum level necessary to preserve the constantly invoked social harmony in the enormous country.
In fact, China will likely announce a growth figure at the end of the year that is completely in synch with the planned figure -- regardless of whether the actual growth figure ends up being exactly 8 percent or, for example, 7.8 percent.
Freeing China from Dependency on Exports
In the first quarter of 2009, the world's third-largest economy grew by 6.1 percent. This is a disappointing number when compared with the double-digit growth China experienced until 2007. Nevertheless, the People's Republic is still in good shape compared with the West, which is sliding more and more deeply into recession.
Prime Minister Wen Jiabao has already indicated that he still has "more gunpowder" available to protect his country against the downturn. But by building new roads, railroads and airports, Beijing is only driving up the unhealthily high proportion of such investments in the general economy, which had already exceeded 40 percent in 2007.
Offering tax rebates for cars and TV sets is not going to solve China's real challenge, which is to free itself from dependency on exports in the long term and stimulate domestic consumption.
The Shenzhen Index has shot up this year.
The People's Republic urgently needs to develop a sustainable social welfare system, one that is far more extensive than current plans call for. Most of China's 1.3 billion people have neither adequate health insurance nor any significant retirement pensions.
China, a late-comer to industrialization, urgently -- and far more so than the West -- needs private entrepreneurs willing to take the risks involved in developing its own high-tech brands. Instead, the country's economic planners continue to puff up stolid government behemoths with their loans.
Even the central bank in Beijing, in its most recent quarterly report, expressed the concern that China must accelerate "innovation and reform."
Instead, provincial party bosses vie to perpetuate the glory of the party by erecting ostentatious buildings of steel and concrete. Ni Jinjie, a prominent financial commentator, warns that if Beijing continues to hand out money indiscriminately, "the structure of our economy could quickly fall out of balance."
The new China bubble is already beginning to quietly inflate on the markets. In Shenzhen, where the stock index has already shot up by more than 50 percent this year, market regulators felt the need to issue an official warning to Chinese investors: "Beware of the dangers of blindly speculating with stocks!"
Translated from the German by Christopher Sultan
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