High growth can't hide problems
- By Hongyi Lai
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China Daily, August 19, 2011
For decades, officials in China have been trotting out a mantra beloved by economists: All problems can be solved by economic growth. This rudimentary philosophy dictates that as long as impressive economic growth is generated, and sustained then the stability of Chinese society will be secure.
It is without doubt that over the past three decades, China has been transformed beyond recognition thanks to an average annual growth rate of close to 10 percent. Isolated until 1978, China has become the world's largest exporter and second-largest economy.
This period of relentless high growth has helped China resolve numerous problems restraining the country's development. Hundreds of millions of Chinese, especially in the countryside, have been lifted out of poverty on a scale unprecedented in history.
Living standards have risen for most Chinese and, in the booming cities, innovative and futurist designs have replaced Soviet-style concrete blocks. But in recent years, challenges to the "growth-as-panacea" model of governance have grown fiercer, casting serious doubts over this philosophy as a basis for sustainable development. Direct causal links can be drawn between fast economic growth and incidents of localized social discontent.
Protests and riots have often been triggered by minor happenings or unfounded rumors, a reflection of the frustration among the working class that has built up as the gap between the haves and have-nots has widened. The gap, also known as the Gini coefficient in China, is now around 0.5, well above the internationally recognized warning level of 0.4. And the disposable income of the average rural resident fell to 30.5 percent of that of an average urban resident in 2006, down from 53.8 percent in 1985.
Many local governments have focused most of their efforts on catering to the needs of entrepreneurs rather than offering economic assistance and providing welfare to the lower-income classes. Using the governmental budget for social spending is viewed as economically wasteful and unhelpful for generating high economic growth. Many officials would rather concentrate on wooing investment in order to generate GDP than on collecting and channeling revenue into local welfare programs and equal income distribution.
Three recent instances of unrest in particular serve as examples of how collective protests have gone hand in hand with high economic growth. In June 2008, in Weng'an of Guizhou province, rumors spread that a drowned school girl had been raped by the son of a local official and that the local authorities had tried to cover it up. Angry local residents responded by setting fire to the offices of the local public security bureau, government and Party committee.
In the years leading up to 2008, Weng'an experienced startling economic development largely due to its booming mining sector. In 2007, the year before the riots, GDP growth in Weng'an was 14 percent. Both GDP growth and per capita GDP were ranked 42nd of the 87 cities and counties in Guizhou province.
Phosphorous ore output, one of the most important sectors in the county, experienced spectacular growth of 38.5 percent a year during the 10th Five-Year Plan (2001-2005). In 2007, Qiannan prefecture, where Weng'an is located, urban employees' wages soared by 27 percent. Its growth was the third highest of the province's nine prefectures. These impressive growth statistics did not seem to suggest the possibility of riots in Weng'an.
However, it was the reckless pursuit of high growth by local leaders that allowed discontent with local leaders and police to grow. The authorities allowed phosphorous mining companies to extract rich deposits and damage local cropland, yet failed to provide rural residents and farmers with a fair level of compensation.
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