Chinese top leader Hu Jintao warned that the country’s competitiveness in trade is gradually being eroded away in the global financial crisis, testing the ability of the Communist Party to rule the country.
Hu delivered the speech on Saturday in a meeting with members of the Politburo of the Communist Party of China (CPC) Central Committee.
Hu underlined the challenges China is facing.
“In the time to come, we will be facing an increasing pressure from the international financial crisis, as well as the slowdown in global economic growth, especially a reduction in exports due to reduced demand, “ Hu said. “China’s competitiveness in trade, a traditional advantage of China, is being gradually weakened.”
“Whether we can turn the pressure into momentum, and maintain stable and fast economic growth, will be a test for if we can handle the complicated situation. It is a test for the ability of the party to govern our country.”
The day before the Saturday meeting, Hu and China’s second-in-command, Wen Jiabao, held a meeting with non-CCP representatives and members of the All-China General Chamber of Industry & Commerce at Zhongnanhai, the CCP leadership’s central compound. Hu also stressed the “seriousness” of the economic situation China faces now.
A few weeks ago, China’s State Council announced a stimulus package estimated at 4 trillion yuan (about 570 billion U.S. dollars) over the next two years to finance programs in 10 major areas. This will be the largest economic stimulus package ever announced in China. Some overseas Chinese economists held that the real investment would be much less than 4 trillion, as many projects in the plan were already in place before the package was announced
Last week, the People's Bank of China (PBOC), the central bank, cut benchmark one-year lending and deposit rates by 108 basis points, its biggest cut in interest rates since the 1997 Asian financial crisis. This is the fourth time within three months that the PBOC cut its rate.
The World Bank issued a new report about China’s economy last week. The prediction for China’s GDP growth was revised downward from 9% in June to 7.5%. If the prediction is correct, this will be the lowest growth rate for China since 1990.
Hu’s talk is viewed by analysts as a sign of a worsening economy.
According to He Qinglian, a renowned economist, “The Chinese economy is characterized by a strong dependence on foreign countries. The dependency factor is about 60-plus percent. Domestic consumption supported by the Chinese economy is in the area of 30-plus percent.”
The sustained financial downturn seems to have played a role in slowing down China’s economy. Recently, large numbers of labor-intensive, small- and medium-sized businesses have filed for bankruptcy or halted production.