China’s economy unstoppable?

Our local rag today features a glowing opinion piece penned by a Yale professor on the rosy state of the the Chinese economy, at least for the next five years.

It makes some good points, and balances the enthusiasm with a few notes of caution:

Rising rates of unemployment in the cities and growing inequality threaten long-term growth at societal and household levels. And if the Chinese government fails to mobilise the health-care system to curb the spread of Aids, the disease will divert scarce welfare funds from education and infrastructure investments. Such a scenario would undoubtedly undermine the strengths of China’s population, and therefore of its growing economy.

However, given the continuing improvements in China’s human software, the core fundamentals for macro-economic growth remain strong. In the immediate future, therefore, even with little or no growth in rates of global trade, it is unlikely that China’s economy will burst like a bubble.

Still, I am amazed that the writer can come to this cheerful conclusion without once mentioning what is at the heart of the bubble argument, i.e., the out-of-control banking system and the nearly 200,000 unproductive, money-bleeding SOEs that keep so many of the Chinese working class employed. This is a lose-lose scenario that simply must be taken into account if you’re going to make sweeping predictions of China’s economic health.

And if UNAID predictions are anywhere close to accurate, AIDS will definitely affect the “core fundamentals” of China’s economy. 10 million infected mainlanders by 2010….Unless they just leave them to die, someone’s got to pay the bills.

The Discussion: 3 Comments

100 million? Dear god that’s bad.

And there’s pretty good evidence that if they lift the peg to the dollar that the export economy could be in serious trouble too.

September 20, 2003 @ 7:46 am | Comment

Sadly, the PRC might just resort to harvesting body parts from the victims to pay bills and even turn a profit.

God. I can’t believe I thought of that.

I think I’ll go wash my mouth out with a Brillo Pad.

September 20, 2003 @ 11:20 am | Comment

Sorry, I meant 10 million, ands corrected it in the post. That is a conservative number from UNAIDS. This is one more example of how China sweeps bad news under the carpet hoping it will simply go away. It has to be taken into account by anyone making long-term predictions about China’s economy. And yet it rarely is.

September 22, 2003 @ 4:22 am | Comment

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