NEW YORK—A Chinese economist based in New York says that China is already amidst a deep economic crisis ahead of the global financial crisis.
Qinglian He spoke at Saturday’s Flushing Forum, launched by local Chinese in Flushing, New York City, to deal with issues of significance to the Chinese community.
This was the forum’s eighth seminar, “The global financial crisis and China’s political and economic development.”
Develop Real Estate By Plundering Common Civilians
From the late 1990s, China’s wealth was mostly from four major industries, real estate, stock market, financial and resource-based enterprises.
To get land for real estate development, the Chinese Communist regime has forced a lot of urban residents to move out of their homes and farmers to give up their farmland.
Since the mid-1990s, 3.7 million families in urban areas have lost their homes and 80 million farmers have lost their farmland. With little or no compensated from provincial governments, these people have become victims of the real estate development and are the main body to rebel against the system. In turn, the government made a huge profit by selling the land to the real estate companies at a very high price. On average, around 60 percent of the local government revenue comes from the trade of the land.
Support the Central Government By Sacrificing the Environment
Another major revenue source comes from the resource-based enterprises.
More than half of China’s top 100 companies are involved in the oil and petrochemical industries which are well known for its contribution to environmental degradation. Chinese companies often choose to be located near rivers, to easily discharge pollutants in the surrounding lakes and seas.
China’s waterways are now at a breaking point, Qinglian He said.
The local residents are the most affected by the pollution, but because these companies are the major taxpayers and the financial pillars of the Chinese Communist regime, little is done to rectify the pollution. About 50 percent of the CCP’s revenue comes from 60 of these large companies, at the expense of the environment and the people.
Stock Market Bubble
The third source is the stock market. Qinglian He said the whole world should be aware that China’s stock market bubble is huge.
According to a joint survey by CCTV (the largest state-run TV station) and several newspapers, 97 percent of investors who entered the market after January 1 last year have lost more than half of their investment. Less than 1 percent of investors have managed to make a profit. The stock market is proving to be a big black hole that sucks money out of investors.
Can a Despotic Regime Save the Day?
The last part is about financial situation. This part is rather complicated, and I would only talk about it briefly. The bad debts incurred by Chinese banks are enormous, amounting to $900 billion according to Ernst & Young.
Beijing would not admit it, but they have failed to list these bad-debt loaded banks with Wall Street after years’ of efforts because they would not pass the rigid regulations of the U.S. stock market.
The banks were finally listed in the A-stock market in Hong Kong and mainland China. The total stock value of the eight major Chinese banks accounts for over 50 percent of China’s total stock market value. Before the listing, the rate of non-performing loans was 19 percent according to China’s official data. Within one year after the listing, the rate dropped to around 8 percent. The banks did not improve its management, but the rate was significantly lowered simply by entering the stock market.
During the recent financial crisis, critics against government bailout published a sarcastic article, saying that given the CCP’s rich experience in turning bad-debts to prize assets, and regarding the U.S. government’s decision to bailout, it’d be easier to sell the U.S. banks to China and let them manage the banks.
Distorted Economic Model
If a country’s growth relies solely on real estate, stock market, financial and resource-based enterprises, its economy is a distorted one. Sixty percent of China’s wealthiest people are real-estate developers and this composition is drastically deviated from world’s norm.
These four industries are where China’s money is concentrated, they are also where a lot of social conflicts occur, Qinglian He said. China’s industrial and social policies decided its economic growth model, which in turn directed China’s social conflict and resistance model.
Social Instability Is Inevitable
Every year in China there are tens of thousands of large-scale social conflicts. These events, which display public resistance, arise from four main causes; first, farmers who have had their land confiscated; second, urban residents forced out of their homes; third, rural residents protesting local pollution; and forth, other events that became a vent of public indignation due to loss of land, official corruption or unfair treatment.
The recent Weng An event is one example, where the death of a girl caused a massive anti-government protest where government buildings and vehicles were burnt by angry residents. Such incidents occur suddenly, and involve more participants than the government can handle. These types of protests have become more and more frequent in the past two years.
The CCP shifts the causes of its own economic crisis to the U.S., I believe the changes in CCP’s internal economic structure and social structure caused its crises.
So although the CCP managed to dump its responsibilities, if it doesn’t act and solve the root cause of the problems, China will be in much bigger trouble than the crisis in the U.S. Because in the U.S., the financial crisis did not cause social conflicts, while in China a trivial economic issue may cause social riots, and can be solved only by political means. This is typical of a despotic regime like China.
