Skip to comments.What President Xi Knows about China’s Economy: 1% hold a third of the country’s wealth.
Posted on 10/25/2017 7:57:20 AM PDT by SeekAndFind
The 19th Congress of the Chinese Communist Party opened in Beijing on October 18. The weeklong event marks the start of President Xi Jinpings second five-year term. In his first term, Xi amassed greater authority than any predecessor since Deng Xiaoping. In covering the Congress and President Xi, the Western media focus has been on President Xis opening comments on the progress China made in his first five years. Much of his speech covered China and the world and her emergence as a power that has earned a position in the first rank of countries.
It is true that Xi begins his second term with his country in a very different position from what it was when he assumed office in 2012. But despite the reporting out of Beijing about Chinas progress, much of the change since 2012 is for the worse. There is enough in Xis speech to conclude that, even if the rest of the world seems to want to ignore those challenges, he does not.
When President Xi assumed office, the official economy was believed to be growing at an annual rate of 8 percent or better. The IMF in 2012 projected Chinas annual growth to be 8 percent for each of the following five years. But that has slowed to 6 percent or less, if government data can be believed, and it is probably much lower. More important, Chinas is an economy in serious imbalance, on a scale not seen since the global economy became so integrated. While the world focuses on and benefits from the China of relative affluence and modernity in Beijing and the coastal provinces, on tech billionaires, high-speed trains, and the global supply chain, Xi knows that more than 500 million Chinese are living in poverty and rural destitution. The World Bank estimates that more than 400 million subsist on $4 a day.
While rising inequality is a hallmark of developing economies, by some measures Chinas income inequality is among the highest in the world. In the context of deteriorating economic growth, it is hard to calculate with precision just how large the inequality gap is. But in his nearly four-hour speech to the party faithful, Xi acknowledged this principal contradiction facing Chinese society when he pledged to address unbalanced and inadequate development and the peoples ever-growing needs for a better life.
President Xi has set a target of 2020 to lift all rural residents living below the current poverty line out of poverty. Thats a significant aspiration given that, in China, large numbers lead to large challenges. In addition to the hardened poverty and destitution of at least one-third of the total population of 1.4 billion, more than 200 million people nearly a third of Chinas work force are forced to migrate to the cities for work. They form a poorly trained permanent urban underclass. By 2025, that number is projected to more than double. President Xi certainly understands that the combustible mix of declining growth, rising income inequality, an aging population, and internal migration in numbers that exceed the entire U.S. population.
In an attempt to account for this and smooth over the obvious challenges, some Western analysts promote the emerging thesis that China today is what Japan was in the late 1980s, with the conditions in place for an extended period of stagflation. Similarities abound: an export-driven economy, internal overinvestment leading to asset bubbles, inflated stock-market valuations, rising wages, and a nouveau riche elite seeking headline-grabbing investments abroad.
The sheer scale of Chinas challenge will dictate a different outcome from that relatively hopeful scenario. In the first instance, Chinas per capita income today is barely greater than half of Japans in the late 1980s. Add to that the rigid income disparity that cleaves the country in half. Poor Rural China itself would be one of the largest countries in the world. The scale of suffering experienced by Chinas poor during Maos Great Leap Forward took place in a country that was largely isolated from the rest of the world. In todays highly integrated global economy, as Chinas growth continues to wind down, we could be forced to confront human suffering on a catastrophic scale: an unparalleled test for Beijing and the international community.
Many Western analysts tend to ignore the truth-telling we hear from Chinas leaders about their own economic challenges, choosing to believe that the Chinese Communist Party has created something unique in its grand mix of socialism and capitalism. These observers quietly applaud Xis power grabs, believing he is creating the conditions for arresting and containing Chinas obvious socioeconomic inconsistencies.
But Xi knows that Beijing has not repealed the basic economic theory: There are too many people chasing too few opportunities, with 1 percent of Chinas population holding a third of the countrys wealth, by the governments own estimates. And with an aging population, whose problems are exacerbated by decades of the one-child policy, the country has too few entrants into the labor market to keep wages low. This is made worse by an education rate inadequate to the task of creating a middle-class work force that can help China escape its globally assigned role as low-cost producer and arrest its decline in economic growth. According to some estimates, more than three-quarters of the labor force did not complete high school.
Seen through that lens, Beijings nascent crackdown on the unchecked expansion and consequent wealth of Alibaba, Tencent, and other high-tech darlings of Western bankers and investors may be a signal of the governments recognition that flagrant wealth cannot coexist with abject poverty. This also explains why Xi has dedicated much of his first term to wringing out the official corruption that feeds off the conspicuous wealth of the urban elite. His party purges, while certainly tools of old-fashioned political consolidation, also are drastic measures to maintain control over forces he knows will contribute to national entropy if left unchecked.
There was speculation leading up to the 19th Party Congress that President Xi would use the meeting to lay the groundwork for an unprecedented third term. The true hallmark of his first term, though, isnt that he consolidated his power and placed himself in a position of unquestioned authority. He did. But he also presided over the further structural decline of a system whose inherent contradictions, he acknowledges, are his countrys greatest challenge. The forces at play in Chinas vast interior may be beyond his ability to influence, and how he manages their impact will define his next five years, and Chinas future beyond that.
ABOUT THE AUTHOR:
Therese Shaheen is a businesswoman and the CEO of USAsia International. She was the chairman of the State Departments American Institute in Taiwan from 2002 to 2004.
Hey, I got an idea. Let’s send our Snowflakes to Beijing so they can conduct an Occupy Tianenman Square protest.
He doesnt expect Chinese families to share the wealth. Im sure he understands the Chinese businessman.
1% hold a third of the countrys wealth and that is a major problem when you are a Communist Government.
Just like in the USA - the top 1% control 34% of the wealth .... only here, the botton 60% of the population controls 4.2% of the wealth and gets PAID to stay comfortable at the bottom ....
Anyone want to see uneven distribution of wealth up close and personal, look into Brazil. Specifically, type the word favelas into YouTube and watch the first few things that come up.
BTW, Chinese cities have child beggers. They're almost everywhere. Walk around for more than five minutes and you'll encounter them.
This is almost as lopsided as the United States. Where is the protest against the “1%” in China?
Wealth CAN be accumulated in a Communist society. But then, China is not an example of “pure” Communism, either.
Cuba and North Korea are much more representative, as is Venezuela.
For example...taking the train from Guangzhou (the metro region has 44 million people) to Hong Kong when you're about 10 minutes south of that glass and steel city you're back in the 15th Century.China's economy is a mile wide and an inch deep.
But Xi knows that Beijing has not repealed the basic economic theory: There are too many people chasing too few opportunities, with 1 percent of Chinas population holding a third of the countrys wealth, by the governments own estimates. And with an aging population, whose problems are exacerbated by decades of the one-child policy, the country has too few entrants into the labor market to keep wages low.
Too many people chasing too few opportunities (claimed)
Too few entrants into the economy because of the one child policy.
Seems mutually exclusive to me.
“..basic economic theory: There are too many people chasing too few opportunities...”
That is basic Marxist theory, isn’t it?
I suspect the guy walking behind a water buffalo with a plow every day will be walking behind the same water buffalo and eating the same rice and vegetables a week after the international market crash finally arrives.
Things could get dicey for the fu er dai trying to drive their Lamborghinis safely out of Chinese cities though middle class neighborhoods, though. :)
Also BTW, did you know that Brazil imported 11 times as many slaves as America did? (4.9 million vs 0.305 million, source Wikipedia).
Yes, and the conditions of slavery in Brazil were so bad that far fewer slaves produced offspring.
In Brazil, it was cheaper to work slaves to death, then buy replacements, than it was to allow the slaves to procreate.
In the U.S., slaves were encouraged to be Christian, to marry, to have children.
Yes, there were lots of exceptions, but marriage and children for slaves were the norm.
I've taken that train - it's an interesting time machine. But I think it's mostly the aging parents out in the fields - the kids are living in Dongguan and working in nearby factories...enjoying, perhaps, a marginally higher standard of living.
Actually, the way it's developing, it seems like in ten years it's going to be wall-to-wall high-rise condos from Guangzhou to Shenzhen.
If I am not mistaken, the vast majority of Chinese still live pretty much the way they did a hundred years ago. The population that live in the big cities along the coast comprise only about 20-30% of the entire Chinese population, with the majority living inland and in rather poor conditions.
Wouldn’t a REAL commie take all that wealth and divide it evenly among the population? Darned fake commies!
Xi made himself equal to Mao and we know what a disaster Mao was
My first visit to Guangzhou (which was called "Canton" back then) was in '80 or '81 (can't recall exactly).One of the things that struck me back then was that during "rush hour" the wide bulevard we saw featured a number of buses,a few army trucks,a few Soviet style limos and about 500,000 bicycles.With God as my judge!
My most recent visit was a couple of years ago.Bumper to bumper Toyotas,Kias and....Buicks! I saw more Buicks there in one day than I see in a month here!
Although it didn't occur to me at the time you may very well be correct to say that the people in the fields are older folks...I didn't pay close enough attention to notice age.
It’s mind-blowing how China transformed so quickly.
No it's not.Think Tienanmen Square.
The daughter of the late Venezuelan dictator, Hugo Chavez, is reportedly worth almost $1Billion.
Apparently, crime and Socialism DO pay.
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