China

8 Pages 2030 Words

n the Politburo nor with minions, has had his reforming way all the same. New sources of growth, he insists, have to be found by drastically (and painfully) shrinking the state. The 15th Communist Party Congress in the autumn of 1997 was a watershed. It marked the start of this new phase with the suggestion that tens of thousands of small and medium-sized state enterprises would be cast loose upon private waters, to float or sink. In the spring of 1999, guarantees that acknowledged the private sector for the first time were written into the state constitution.


Growth from heaven
The first two decades of reform have in essence been catch-up growth, gains that came from disbanding the agricultural communes and from allowing capital and particularly labour to be poured into low-end manufacturing and processing, a lot of it for export. The government did not really have to do anything to foster such growth, other than to keep out of the way. Double-digit growth rates were the norm, and fast growth created new jobs for workers made redundant by inefficient state-owned enterprises, migrants from the countryside to urban areas, and young people looking for their first job.


Now those high growth rates are gone, possibly for good. Growth is not only lower these days, but its “labour intensity”, according to Yukon Huang, head of the World Bank’s mission in China, has also slowed. What growth China is achieving is creating fewer jobs.
“We have run out of easy things to reform,” explains a senior Chinese official. Laying the foundations for the next phase of growth will be very much harder. The productivity of the land—and remember that two-thirds of China’s 1.3 billion people still live in the countryside—has almost reached its natural limits, given China’s severe shortage of water. Higher productivity in agricult...