This is an interview conducted by Dong Fang, the host of the NTDTV program
“Business, Finance and Politics”. He is talking to World Economy reporter
Mo Yao.
Dong Fang: According to Chinese official economic data, China’s number
of exports is rising, foreign investment has achieved a record level and urban
consumers, as well as people in other areas, spend a lot of money. Although
several apex economists estimate that the Chinese economic growth rate will
slow down in 2003, officials estimate that the GNP growth rate this year will
still achieve 7.9%. According to this data, China’s economic situation is extremely
bright. But there is one point that is not understood. In the first 10 months
of last year, the Chinese government’s fixed asset investment increased to 276
billion US dollars: this growth rate is as high as 24%.
Mo Yao, if economic development is really that good, why did the Chinese government
put massive funds on fixed asset investment, a measure to further stimulate
finance?
Mo Yao: China’s economy is characteristic of the two-track system. On
one hand it shows development, appearing mainly along the coastal area and in
the southern district, and portraying a buoyant and confident economy. On the
other hand, the Chinese economy actually shows difficulties in making progress,
mainly in rural and old inland industrial districts. The movement on the first
track is good; in the first 10 months last year, export increased 20.6%, foreign
contract investment rose 35% compared to the previous year, and actual direct
foreign investment rose 20% and broke through 50 billion US dollars. But on
the contrary, the second track looked very worrying, with critical unemployment,
falling prices, surplus productivity, low quality production and too many limits
from the strict bureaucratic system.
Dong Fang: It has already been 5 years since the Chinese government
carried out expansionary financial policy. How do you perceive the effect?
Mo Yao: The purpose of the Chinese government’s deficit policy is to
stimulate economic development continuously, using methods – such as the construction
of roads that connect cities and the countryside, power plants and irrigation
systems – to balance the decline in the rural economy and create more employment
opportunities. It is difficult to get a short-term return from these investments.
There were frauds in many investments and a lot of the funds were wasted, but
these constructions and transformations will possibly have a positive effect
in the future. But returning to another point, a habit of depending on the government’s
expansionary economic policy has formed and this certainly is not a good sign.
Moreover, the government’s stimulation does not work as effectively as
it did at the beginning. One more point is that banks in China have seriously
bad debt problems, and they are still providing high-risk loans to state-owned
enterprises without these debts being written off. That could initiate a financial
crisis and will thus threaten the economy in the future.
Dong Fang: How is it possible to support continuous motivation towards
Chinese economic development in your opinion?
Mo Yao: The enterprise rather than the country should be enabled to
be the most effective investor. The goal of government direct investment is
to establish a macroscopic foundation for the entire national economy, to create
a good environment for other forms of non- governmental investments, and to
promote individual and business investments. But at present, state-owned enterprises
in China still hold monopoly status in some domains, for instance, telecommunication
and transportation industries and so on. Inherited problems still exist. Banks
are not willing to provide loans to civil enterprises and this is restricting
private development in the economy to an enormous degree.
Dong Fang: In China’s two-track economy, the overwhelming majority is
in the second track economic domain of unemployment, poverty and social dissatisfaction.
The disparity between the poor and the rich enlarges day by day in China and
this will bring a negative influence to the long-term development of the Chinese
economy. What is your view regarding the prospects of the first track economy,
the extroverted economy of the coastal and southern areas, this year?
Mo Yao: The first track economy in China mainly relies on exportation,
and the export increment of some industries will slow down because of global
economic depression. According to data from a Chinese information centre, the
government’s reducing of export credit loans, trade partners’ adoption
of anti- dump measures and the war between the US and Iraq, could all cause
a drop in export growth rate this year.
Dong Fang: Thank you, Mo Yao.
Posting date: 6/Apr/2003
Original article date: 5/Apr/2003
Category: Open Forum
