Sunday, October 12, 2008

The efficiency of Chinese central planning: over 1 billion starved

I almost shuddered when I read this article:
BEIJING (AP) — China's ruling Communist Party on Sunday said it would seek to expand its massive internal market to counter the global economic slowdown that has reduced international demand for Chinese goods.

The party, led by President Hu Jintao, released a statement at the end of a four-day meeting of its Central Committee where it also approved a plan aimed at doubling rural incomes by 2020.

"We should step up efforts to boost domestic demand, particularly domestic consumption and keep the economy, the financial sector and the capital market stable," the party said in a statement released through the official Xinhua News Agency.

The party also recognized inherent "contradictions and problems" with China's economy and said all members should prepare for greater challenges as the global financial crisis unfolds.

China faces difficulties from high energy costs and inflation, but officials say the country has growth potential despite global uncertainties because of its large labor pool, vast domestic market and the increasing competitiveness of its companies.

Economists have cut China's growth forecasts to as low as 9 percent for the year, down from last year's 11.9 percent. That would be the highest rate for any major country, but Communist leaders want to keep growth robust to reduce poverty and avoid job losses, which could fuel political tensions.

China lowered interest rates Wednesday in an effort to revive slowing economic growth and help struggling exporters.

The party said it aims to double the income of the country's farmers — currently around $590 per person a year — over 12 years to ease the growing and politically explosive gulf between the urban elite who have benefited most from China's two-decade-old economic boom and its vast poor majority.
To anyone familiar with China's modern history, this should evoke recollections of how well Mao's "Great Leap Forward" did, which was launched under similar rhetoric.

Even if everything goes as "planned," doubling over 12 years is about 5.95% consistent annual growth, meaning China's rural poor will still be left behind. So much for equality under communism.

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