China’s economic downturn
Editor.
The editorial “Distress in China” (ST August 23, 2023 made interesting reading. The post-Covid economic rebound heralded by Beijing since 2023 seems to be false. If you put party politics first and the economy and the people second, this is bound to happen – economic slowdown. China was at an economic and political cliff-edge as dangerous as that confronting Deng Xiaoping when he took power and whose economic policy centred round, “It doesn’t matter whether a cat is white or black, as long as it catches mice.” A metaphor for his pragmatic approach to economic reforms in China, which emphasised the need for ‘practical solutions’ rather than ‘ideology.’
A Leninist Xi Jinping’s doubling down on centralised economic authority, re-empowered the State-owned sector, interfered with the conduct of fintech and other entrepreneurs whose stellar success outshone the Chinese Communist Party, and fell back on the discredited ploy of constructing his way out of nascent recession. The economy was already stagnating well before Covid hit. As well as all the other more Davos-friendly objectives of Xi’s plan for economic globalisation, the Belt and Road initiatives core aims were to export China’s over-reliance on concrete and steel, and to build debt traps wherever China felt the need of coercive political and military traction.
The stunning economic growth of the past 20 years made China to declare in 2022 that it has lifted nearly 800 million people out of poverty. But now the youth unemployment is rising so significantly that China has decided to stop releasing youth unemployment figures as the country’s joblessness for the age group 16 to 24 years in urban areas reached 20 percent with an overall unemployment rate of 5.3 percent for that country last month. Then there is the weaning of the Yuan and deflation woes. The US and western countries were struggling to bring down inflation but deflation in China means weaker trade, weaker sales, and a weaker outlook for its factories as the prices of goods fall as demand weakens. Last month imports fell by 12.4 percent and exports fell by 14.5 percent, as global demand for Chinese goods tumbled. Then there are troubles coming from the stock market exchange. Twenty five percent of China’s GDP is on property and this is in the doldrums.
As real-estate developers struggle in a slowing market, local governments are losing money on their land sales, leading to huge debts. This debt, in turn, puts more pressure on Chinese banks and weakens the government’s ability to improve its public services—exacerbating the risk of a financial crisis in the country. Land sales typically amount to 40 percent of local government. China’s outstanding government debt was over 123 trillion yuan—or $18 trillion—last year. Almost $10 trillion of this was what’s known as “hidden debt,” contracted by local governments by financing platforms backed by cities or provinces.
For centuries, China had been the most populous country in the world, a record that was snatched in April by India. This isn’t good news for the Chinese economy, which owes much of its transformation to its large workforce. Its population growth has not only slowed down, but it’s likely to decline faster in decades to come, according to the Brookings Institute, a Washington-based nonprofit. “A working-age population that peaked in 2011 at more than 900 million will have declined by nearly a quarter, to some 700 million, by mid-century,” the think tank wrote. “These workers will have to provide by then for nearly 500 million Chinese aged 60 and over, compared with 200 million today. America’s social security challenges seem like a policy picnic by comparison.” A demographic slowdown in China will leave the country with fewer available workers—and more retirees to take care of.
The editorial rightly pinpointed that “If the economy fails to grow, matching with the aspirations of the people, the situation would be tailor-made for trouble. A similar fate awaits India too, where elections have the potential to unseat governments”. Elections aside, as far as economics and business is concerned, India ought to draw lessons from China. While America is in a rolling recession (when some industries contract and suffer job losses, while others continue to grow, leaving the overall GDP growth positive, but low by historical standards). Ruchir Sharma, Founder of Breakout Capital and Chairman of Rockefeller International, points out “China’s consistent growth rate declined over the last 15 years. From 10% in the 2000s to 6% last decade, he projects it to slow down further to 2.5-3% annually in the coming decade due to declining population growth and high debt levels. Sharma believes that demographics and debt dynamics will hinder China’s economic growth, making it unlikely to surpass 2.5-3% on a trend basis. This year, the official data expects a 5% growth rate for China”. This is in line with the growth forecast of Goldman Sachs, Bank of America, Citi, ANZ, UBS, JPMorgan, Morgan Stanley and Barclays.
Yours etc.
VK Lyngdoh,
Via email
MCTA’s unjustified non- cooperation movement
Editor,
The Meghalaya College Teachers Association (MCTA) has been on a non-cooperation movement against the implementation of NEP by NEHU since August 1, 2023. Majority of the colleges have started conducting classes with their part-time, guest or non- MCTA full time teachers. I think it’s time we should question the MCTA members on why they have decided to take such a drastic step of not conducting the 1st semester classes as a first step of protest? It directly affects the students’ career and future. Now with a limited number of days available, how can a student be able to get the credits necessary for each paper? Have the protesting teachers thought about the consequences the students will have to face for no fault of theirs? MCTA teachers must be held responsible for playing with students’ lives and jeopardising their careers.
According to MCTA, the decision to implement NEP was done without the consent of the academic council of the University. In that case, MCTA could have made the minutes of the meeting public. It could have also knocked on the doors of the Hon’ble High Court. This unnecessary and unjustified move by MCTA has disappointed the whole student community and they must apologise for this kind of irresponsible decision. I would also like to know whether the protesting teachers are drawing their full salary without taking the required number of classes. Many MCTA members have spoken about upholding principles. Will they lead by example in this regard by forfeiting part of their salary for not taking classes?
In fact, this may help the government to build some infrastructure for students. One more critical question is – why is the Government so silent in this regard? Shouldn’t the Education Department be sending notices to the teachers to start 1st semester classes immediately when the colleges and most importantly the students are ready to move ahead with the NEP degree program? I request the MCTA to withdraw their agitation immediately and focus on building students’ careers and stop playing politics with students’ lives and future.
Yours etc.,
A concerned parent and teacher,
Name withheld on request