.png)
Another CCP official, Zhou Yong, a staff member of the Central Party School, estimated that the number of unemployed migrant workers coupled with unemployed recent university graduates, totals about 50 million for 2009.
Accordingly, the 300 million that are unemployed constitutes 30 percent of the labor-age population in China. This approximates my calculation which was based on data published by the National Bureau of Statistics from previous years.
The rising unemployment rate results in reduced consumption, with China's domestic demands consistently weakening in recent years, particularly since 2009, when real estate prices were stimulated by Beijing. The Chinese peoples’ buying power is almost solely focused on the housing market, with China’s final domestic consumption rate falling to a historic low. Its residential (private) consumption rate (resident consumption / GDP) in 2008 was 35.5 percent—not only lower than the 70.1 percent of the U.S. during the Great Depression but also even lower than that of India’s 54.7 percent. From 1978 to 2005, China's average consumption rate was 58.5 percent, lower than the global average consumption rate of 76 percent during the same period.
Imbalance in China’s Economic Structure
A low residential consumption rate and a high investment rate are the main reasons behind China's economic structural imbalances of the past 30 years.
The Chinese economy is a “Three-Horse Chariot,” and investment is one of the horses (the other two are export and consumption). From 1978 to 2005, the annual investment rate averaged 21.1 percent globally and 27.8 percent in Asian countries. But the figure climbed to 38.9 percent in China—much higher than that of other developed countries or developing nations. After China joined the WTO, the imbalance of the Chinese economy was invariably affected and eventuated in the structural imbalance of the global economy.
The most obvious manifestation of this imbalance is the economic relationship between China and the U.S. On one hand, American consumption is the highest in the world and depends on its high individual debt and the role it plays in supporting its own economic growth and nourishing the global economy. On the other hand, Beijing is buying U.S. bonds to sustain Chinese exports in order to maintain the credit and consumption of the U.S., making the U.S. China’s biggest trading partner.
However, since the financial crisis, American consumption has shrunk, influencing exports from Germany, China, and Japan, whose economies are heavily dependent on exports. This is also the case for many other countries. Many global experts are appealing for a new model of global economic growth—one without a high dependence on the individual debts and trade deficits of the United States.
Americans also began to change their habit of low savings and high consumption, which will result in reducing the U.S. loan from China. As of mid-December 2009, the third-quarter Federal Reserve “cash flow” data shows that the U.S. household savings rate continued to rise, stabilizing at about five percent. U.S. residents have become the main buyers of government bonds, and the incremental proportion of foreign investment in U.S. Treasury bonds dropped from 54 percent in 2008, to 27 percent in the third quarter of 2009.
Frankly, increased participation in savings by the U.S. is not good news for China, since it means China’s biggest export market is reducing its contribution. According to the National Bureau of China, economic growth in the first three quarters of 2009 reached about 7.7 percent. Four percent was attributed to consumption and 7.3 percent to investment—exports offer a negative contribution to China’s economic growth. Because of exports, one of the three horses is nearly at a standstill, while domestic demand is depressed. Under the circumstances, Beijing has to continue to promote the real estate bubble, ignoring all kinds of warnings, like an addict relying on drugs for the duration of its life.
Beijing always quotes the words of "foreign media" (such as overseas Chinese media invested in by the CCP) to prove that, so far, China is the "Noah's Ark" that will lead the world out of the economic recession, promoting the prospect that in the next ten to fifteen years, China will overtake the U.S. as the world's economic superpower. However, at present, China's economic "prosperity" is actually only irrational exuberance based on its vacuous real estate bubble. If no other means can be found to salvage China's economy, the Chinese economy will become a "Titanic"—just as soon as the real estate bubble bursts.
Read the original Chinese article.
