Mainland economists warn of slowdown
Thursday, January 9, 2003
china.scmp.com
ALLEN T. CHENG
The State Economic and Trade Commission warned yesterday that the nation's economic growth will slow this year, the first sign that China's leaders are gearing up for a less-than-stellar performance in 2003.
"We see economic challenges ahead, especially in light of global uncertainty," said a report issued by a group of economists with the commission. "Global instability will impact our country's exports."
Although the report does not specify the extent of the economic slowdown, it comes on the heels of an outstanding performance last year, when gross domestic product (GDP) grew by 8 per cent, and casts doubt on a smooth first year for the newly installed fourth-generation leaders.
The report also contrasts with a rosy forecast of 8.2 per cent GDP growth for 2003 by the State Council's Development Research Centre last summer.
Regional economists in Asia agree that China's economy will continue to grow between 7 per cent and 8 per cent, but warn that a prolonged conflict between the US and Iraq may hurt China.
"If the war drags on beyond two or three months, China's GDP will have problems," said Andy Xie, chief economist with Morgan Stanley Dean Witter in Asia. "It won't reach 7 per cent."
While growth below 7 per cent would not cause problems, any economic slowdown is worrisome for mainland leaders. China is continuing to restructure its economy, with massive layoffs from state-owned enterprises and in government, and a minimum 5 per cent GDP growth is crucial to create the jobs necessary to absorb the unemployed, according to political economist.
Whenever there is a rise in unemployment - which may be as high as 20 per cent or more in rural areas - officials clamp down for fear of political instability. Last May, tens of thousands of laid-off workers rioted outside shuttered steel mills in Liaoning province, forcing the government to despatch police to end the protests.
In addition, the looming US attack on Iraq could send oil prices surging, and the impact on China - which in recent years has become a net oil importer - could be tremendous.
"Of course, this could be a challenge for the new leadership," said Laurence Brahm, a Beijing-based political economist. "The popular mandate of the Communist Party is we're going to bring you into an industrialised 21st century. Can they continue to do this with a war in the Middle East and high oil prices? We don't know. With new leaders in their positions, will they carry that credibility to manage in tougher times? I don't know." |
