The Chinese economy is an anomaly

The Chinese economy is an anomaly

A Chinese professor at Jiaotong and Fudan Universities tried to argue that financial suppression has caused a twisted structure of the industries, an imbalance in income distribution, and a weak growth in consumer consumption. He said that the Chinese economy is an “anomaly”.

The professor pointed out several contradictions of the Chinese economy: Personal savings are the highest in the world but consumer consumption is the lowest in the world. Income from labor as a percentage of the total national income is the lowest in the world. Urbanization lags behind industrialization. National income continues to go into the deep pockets of state owned industries and enterprises and government coffers. Increase in labor wages lags behind growth in labor production. Industry, especially heavy industry, continues to grow rapidly while the development of the service industry lags far behind. Increase in employment lags far behind the rate of economic growth.

The professor used a formula (consumption/GDP) to caucluate this anomaly:

In 2000, total consumption/GDP = 62.3%; in 2009, it was 48.5%.

In 2000, the consumer spending rate/GDP = 46.4%; in 2009, it was 35.4%.

In 2000, the people’s savings rate was 31.1%; in 2009, it was 40.4%.

[Master Chen says]

All these figures, formulas, and the professor’s argument that the suppression of financial interest rates is the root cause of all these “anomalies” of the Chinese economy do not convince me.

To me, the suppression of interest rates is not the root cause of the “anomalies”.  It has nothing to do with them.

The Chinese themselves admit that the Chinese economy is an “administrative type of market economy.” I say, the Chinese mainland economy is an administratively manipulated partial market economy based on centrally planned economic principles. It has been using welfare economic principles to manipulate a partial market economy. And direct microeconomic government intervention is the root cause of the anomalies.

For more than a decade, the government has tried to use “macroeconomic control and adjustments” (hong guan tiao kong) to “treat” microeconomic ills.

The segregational administrative policies since the Mao Zedong era up to now have administratively separated the rural areas from the urban areas, excluding the rural areas from urban economic development, excluding private enterprises from the industrial sector, prohibiting the establilshment of private banks and private financial institutions to favor monopolization of state owned banks, segregation of the rural population from the urban population by household registration, the concentration of medical services in the cities to the extend that in rural areas, there remains almost no medical services, rural land control and monopolization of land by the local governments, the dependence of local government revenue based on land lease income instead of local tax revenue, etc.

The professor, like all the Chinese mainland people, from government spokesmen to the so-called scholars and experts to the fat lady ranting on a Canadian train while being filmed by young and curious onlookers, blame everything but their own fault.

It is like blaming the horse for the water buffalo’s ills! As a metaphor, the horse came from the West, the water buffalo is of the East. If one is the buffalo, always blame the barbarian Western horse!


About masterchensays

Victor Chen, herbalist, alternative healthcare lecturer, Chinese affairs analyst, retired journalist
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