Chinese President Warns Nation Losing Its Economic Edge

BEIJING — Chinese President Hu Jintao warned that China has started to lose its competitive edge in trade amid the global financial crisis, as he told Communist Party leaders the challenge posed a test to the government's ability to rule, state media reported.

China's economic growth is expected to fall to about 9 percent this year, down from last year's 11.9 percent. That would be the fastest of any major economy, but Chinese leaders worry about possible unrest as unemployment rises, especially in export industries where factories are shutting down as global demand plummets.

"External demand has obviously weakened and China's traditional competitive advantage is being gradually weakened," Hu said, according to the Communist Party's official People's Daily newspaper.

Hu told members of the Communist Party's powerful Political Bureau that the financial meltdown posed critical challenges to a government that has staked its legitimacy in part on competent management of a rapidly developing society.

"Whether the pressures can be turned into a driving force and the challenges turned to opportunities ... is a test of our ability to control a complex situation, and also a test of our party's governing ability," Hu said.

Hu urged party leaders to step up efforts to reform its economic growth model to achieve development that is sustainable.

He said greater effort should be made to raise living standards, use resources more efficiently and develop rural and urban areas, the report said.

The remarks come after China's top economic planner Zhang Ping, chairman of the Cabinet's National Development and Reform Commission, warned Thursday that the impact of the global financial crisis is worsening and that rising job losses could fuel instability.

But a government researcher said that despite the impact of the global slowdown, the country's economy is expected to grow by 10 percent next year as domestic consumption grows with rising personal incomes.

"Personal income continues to increase as millions of migrant workers flow into the city to get their lives improved. Enlarging demand for houses and autos will form huge and lasting consuming power," said Zhang Liqun, a researcher at a think tank attached to the Cabinet's planning agency.

On Wednesday, Beijing announced its biggest interest rate cut in 11 years to increase consumer and company spending. A multibillion-dollar stimulus package launched on Nov. 9 aims to boost growth through heavy new spending on construction, tax cuts and aid to the poor and farmers.

Beijing plans to spend 18 trillion yuan ($2.6 trillion) in 2009 alone to help blunt the impact of the global financial crisis, using the immense capital accumulated over years of double-digit economic growth and booming exports to build railways, roads, airports and electricity networks.

Comments

[laucarlson]

HIstorically, cheap labor has resulted in lack of innovation. That's why Sumerians invented the wheel and Egyptians built the pyramids. Why the South held onto growing cotton, while the North embraced steam engines. Why we are wondering what happened, and innovation is coming from Europe. We have embraced the Asian cheap labor ideology. We're ALL Asians now.

[KillTheMessenger]

You are mistaken about one thing: Asia has not embraced the cheap labor ideology. They have embraced innovation.

[likeicare]

Translation: Chaos!

If China's billions start to grumble, chaos ensues. If chaos ensues, the government knows it can never manage it.

If the govenment can't contain billions of people who are restless and uneasy about their situation(s), civil war and/or social conflicts (long simmering) will follow.

No matter how you look at it, it doesn't look good -- for anybody.

[KillTheMessenger]

But China's billions are not grumbling. Chucks. You still don't get to win by default and China is going to steal your lunch no matter what you do from here on.

:-)

[netzwerg]

They are making tons of safe, high quality products. iPods, iPhones and Lenovo notebook computers, high end cell phones and lots of airplane parts are all made in China and they are of the very quality you are willing to pay for.
Of course, you can't buy those at Walmart. Which brings us to the center of the problem... if all you know about China is by proxy through products sold at Walmart, you know nothing about China. You do know a lot about Walmart, though.

[sculptor]

Who are they kidding? Ttheir growth has to start slowing sooner or later so they might as well face the fact now and start preparing for the future.

[TXfemmom]

My son worked for a large American and European consortium building a petrochemical plant and refinery in China. He had a military engineering background but even the Western engineers and construction guys who did not, were totally surprised and totally disgusted at the level of corruption, incompetence, and lack of basic understanding regarding safety within the Chinese working with them.

Their Chinese counterparts discussed how many of the products produced there were permitted only to be exported and could not be sold within China. That led to my son having his mother purchase and send to him six pair of size ZERO brand-name jeans for the female staff as a gift from the company to them. They could not purchase the for export ones in China, and the ones sold there fell apart. He and one of his friends were hilarious in recalling how the size ZERO jeans for U. S. markets still were large on their staff, but they were absolutely THRILLED with the status symbols.

China needs to stop stealing intellectual products and information and concentrate on producing for their own people and in doing so, they would be developing support and ongoing improvement for their own people.

[EminentGrise]

I hope you're not holding your breath about China respecting intellectual propereties. One problem is guys like Gates would rather make a deal than confront the Chinese. It will be interesting to see how Obama handles this. The unions will want him to be assertive. But the big O is not confrontational.

[KillTheMessenger]

China does not violate intellectual property they way you think. They simply have a very different legal concept of it. Within that concept they do actively enforce IP law. That we do not like their concept is really our problem, not theirs.

[szlevi]

Chinese will NEVER stop copying others. Seriously, I HATE THE RIAA-MPAA-mob and their illegal attacks on personal and civil rights, backed by corrupt Congress and executive branch but the Chinese disregard for anything that's not guarded by machine guns is so deeply rooted they will NEVER show respect for any IP.

Of course, this is why they will NEVER invent ANYTHING, mind you.

[KillTheMessenger]

The Chinese will never invent anything? Like they never invented paper, black powder, fireworks, artillery, the compass, printing etc..

http://en.wikipedia.org/wiki/List_of_Chinese_inventions

Right.

:-)

[xtiangodloki]

China will never invent anything? LOL.

For the ignorant, MOST OF THE WORLD ignore IP laws. In fact, the only people who do respect IP laws are those from first world nations who could actually afford to pay for an operating system what it would take an average 3rd world worker a month to make. This has nothing to do with culture, but everything to do with income. Heck, even people in the US are downloading illegally. Instead of admitting that they are same as pirates in China or Russia, the pirates in the US pretend to hate RIAA/MPAA because the later groups "attack their personal and civil rights".

Given the proper resources, Chinese can and will invent things. For example, AMD's Shanghai-line of CPUs are designed in Shanghai.

[KillTheMessenger]

Your son probably does not quite understand the way Chinese do business and have been doing business for the past three thousand years.

The problem is not that there is corruption in China. The problem FOR US is that we do not know how to work it. The Chinese do. But that cuts both ways around. Many Chinese business people are just as lost when doing business in the West because they are no ways to bypass some of the harder things in the world of business and there are no ways to "grease" the system. The real question is who is going to learn faster? Are we going to learn to deal with them faster than they are going to learn to deal with us?

To be perfectly honest with you, I don't think so. And that puts us at a real disadvantage.

"China needs to stop stealing intellectual products and information"

China does not "need to do" anything. They are over a billion people with superpower status. The sooner WE understand that, the less costly the confrontation will be for us. Because they really won't care about what we think or want.

[xtiangodloki]

So let me get this straight. People are paying your son good money to work in China, and you are upset because your son wanted to hit on some Chinese chicks by buying them brand name jeans, and thus is asking you to buy them for him, jeans with a size which you wish had during your prime.

If you don't want the Chinese people to "steal" intellectual products and information, then tell your son to not work in China. It's that simple. The reason why the Chinese people are asking your son for help at a premium is because your son have knowledge which the locals don't. US companies buy foreign companies for their technologies all the time too. Your son willingly took his job because he sees opportunities, and he wants to hit on his staff. So why are you upset?

[Bitsko]

Can't you s e x this boring story up a little? I mean, "Whether the pressures can be turned into a driving force and the challenges turned to opportunities ..." zzzzzzzzzzz

[EminentGrise]

How this. Most totalitarian countries blame others for their problems and turn to violence to solve their internal problems.

[KillTheMessenger]

Which pretty much describes the US under the neocons and totally fails to describe China which has done nothing but to successfully solve its internal problems for the past 50 years without blaming anyone.

[FreedomCorpse]

China has to build their growth internally without depending on draining the US constantly with huge trade deficits, the natural economic backlash from the drain is what is causing their current decline of growth. Build stuff chinese folks want and can afford. A ponzi scheme of draining other countries by flooding them with cheap imports is doomed.

[Twinkie]

I think you're a bit confused. It is western companies making stuff in China that are flooding their own and other countries with cheap imports.

[TAIsabel]

I have a theory based on the history of China. Since 221 BC when it became a unified nation, China has had a deep rooted tradition of respect for ancestors, emperors and leaders. A democratic system is not in their historic or political make-up and movements, be them social, political or economic take on a mass mentality with little, or no opposition. This means that their system of checks and balances is flawed towards obedience of authority and a tendency to all go in the same direction without questioning. The rule of emperors morphed into a Maoist revolution whereby Mao became just another "emperor in communist's clothing".

What I mean to say with all this is that China embraced capitalism at full frontal speed late in the game but with the same passion it had for communism without skipping a beat. They "joined the capitalist party" late in the game, at the twilight of a now decaying system. They now possess all of the capitalist bad habits without having the historical, technical and experience factor that western economies had and many had forewarned of its flaws. Lead, melamine, ecological destruction, overcrowding of cities and the decline of agriculture in favor of cheap manufacturing has occurred over a period of only 20 years.

I, for one, think that their "late love affair" with capitalism is going to backfire and meltdown faster than Joe the Plumber's fifteen minutes.

[PhilipTaylor]

China will work with the rest of the world to overcome the negatives of manufacturing and will lead their people out of poverty. They will be major allies of Obama's America and those that follow Obama as America will remain the top consumer nation for some time. We have entered a WORLD Economy where all leaders must work together for the success of all participants.

In a World Economy one country's success at the expense of others is no longer an option! We must now foster progress for all nations for the good of all nations. Of course, there will be setbacks but that is part of progress. The key is in a World Economy success is measured by two things:

1. Overall Growth of GNP - we all grow!
2. Maximize the worst case Country's growth of GNP - maximum effort where most needed!

By doing both we gradually eliminate poverty and we reduce the chance of WARS while bringing more productivity and quality of life to all!

We must remember that across all regions and all religions we nearly ALL want Peace and Better Lives. Working together is our only option in our World Economy.

[TAIsabel]

This has nothing to do with "one country's success at the expense of others" and, as much as I find your idealistic optimism charming, I fear that you missed my point.

China is suffering from the GLOBAL capitalistic meltdown with the added handicap of hitching its buggy, late in the game, to a dying horse.

[BigGuy]

The Communist party leaders in China want political power for themselves and economic power for China. The people at the top are not there for the money. They are there to exercise power. They are there to show us Barbarians that they have the mandate of heaven.

The Chinese people are enormously supportive of the Communist party and they are tremendously patriotic. The party has delivered the greatest increase in wealth in the shortest period of time for the most number of people in world history. Why whouldn't the Chinese support their gov't?

In fact, the Communist party has to watch out for the Chinese people acting out their patriotism destructively. They are concerned about attacks against foreigners within China, like Japanese tourists, and about nascent facism.

[KillTheMessenger]

I don't think the Chinese particularly care about what you think. China has been "capitalist" throughout all of its history. They always were a nation that fully embraced manufacturing, trade and opportunity. Authority to a Chinese means something very different from what it means to us. For most of its history China was a flourishing mix of the old and the new, constantly embracing influences from the outside without neglecting its own history and (with very few exceptions) without trying to force its culture on others.

China has plans to dominate the 21st century and thanks to all the ignorant folks in this country, they easily will.

[xtiangodloki]

Your theory linking Confucianism to Chinese people's tendency to obey authority is hardly original. The problem with your theory is that most other Asian nations such as Japan has the same tendency to respect authority. In fact, most cultures older than a few hundred years tend to have more respect for the existing hierarchy.

As for China's integration with Capitalism, it's no secret that capitalism will topple the communist party if the country's growth rate drops less than a few percentage points. This is why you have this article in the first place. It's pretty obvious that you don't know enough about China or Capitalism to conclude that China possess all of the bad pieces of capitalism while skipping over the "good" ones.

I see lots of Huffpo readers can't wait to see China fall. Hoping for China to fall is plain stupid and petty. For one, most of the large companies across the world is depending on China's growth to fuel their own growth. If HuffPo reads want to see US to succeed, they better hope that China succeeds as well.

[matthewhusseinsmith]

"respect and obey authority" is pure garbage! Power should always be questioned, peacefully, politely, but always. In a democracy, the role of a professional, incorruptible press is to question the validity, motivation and competence of the the actions of those in power. Unchecked, unaccountable power is an abomination, an insufferable violation of the humanity of man.
Since the beginning of their history, the Chinese people never had freedom of speech. Try asking for permission from the Chinese police to demonstrate, then if you get it, unfurl a banner on Tien An Men Square that criticizes an action of the central government. See what happens next.

[dteg]

We will need the world more than ever in these next few years. We will need someone lke China and India to help finance the next USA trillion dollar baillout.

[dteg]

I wouldn't be quick to count China out. 9% growth in a bad global economy is still very good. With a billion people and pratically everything in WalMart saying made in China they will definetly be a major force for many years to come.

[unholyman]

That must be the "official" prediction. The World Bank has China at 7% next year, and we can expect estimates to continue to drop. 5% is possible, IMO.

China resembles a tech stock - it must grow or die. Stasis is not possible under the current political arrangement.

[KillTheMessenger]

China has existed continuously for 3500 years, that's fifteen times longer than the US. What in the world makes people think they will "die" as easily as a tech stock????

One can only grab ones head about such a naive look at the world.

[1manisland]

Fu#k em ! What have they done but stole everything we ever invented to make cheeper. I am so sick and tired of buying there cheep crap. I do mean crap !

[1manisland]

Typo : Cheap not Cheep !

[gmlaster]

Have you bought any of these Chinese-made DVD players lately? Two to three months of normal use and they break.

He's right. They're not cheap. They're CHEEP!!! And the stuff they make is definitely crap.

[bmwracer]

Thing is, a LOT of stuff, particularly consumer electronics is manufactured in China.

If you were to throw away everything made in China in your house, your place might be pretty empty.

[timetorevolt]

so..and we could employ more people here if we stopped by China's crap

[Twinkie]

There some very naive folks here lol. If people wanted to buy more expensive locally made goods then there would be a market for it, and local companies filling that market. But uhm, there isn't. Do you think companies move their manufacturing to China for the scenery or something? And who do you think owns most of the USAs debt? If China goes down, the US goes down even harder.

[bmwracer]

If China made safe products for consumers, maybe they wouldn't be losing their edge.

[KillTheMessenger]

They are making tons of safe, high quality producst. iPods and Lenovo notebook computers, high end cell phones and lots of airplane parts are all made in China and they are of the very quality you are willing to pay for. Of course, you can't buy those at Walmart. Which brings us to the center of the problem... if all you know about China is by proxy through products sold at Walmart, you know nothing about China. You do know a lot about Walmart, though.

:-)

[Samalabear]

Parts of this article would make it look like China was a compassionate nation. Who are they kidding? They let it all hang out for the Olympics and we weren't fooled.

[KillTheMessenger]

China is a nation with a cultural history of 3500 years. If you take the time to learn about some of that history you will realize that Communist China is a lot more connected to that history than abstract Western ideas about universal democracy ever could be.

[Americanformoderates]

Interesting to see how it turns out. I doubt China will see revolutions because of this, but I think we're going to see more and more freedom slowly emerging in China. It's that, or the Communist Party will eventually be overthrown. It's populace, despite the incredible censoring of the internet(which many chinese are finding a way around...) are beginning to realize that life could be so much better in China if only this, or this occurred, and the government is intelligent enough to realize that if they don't give the chinese this, or this, they'll eventually be facing revolution, however they are carefully planning it out so that they give the populace what they want at a slow enough rate so that they don't entirely lose grip on their political power. Oppression works for some time, but it does not work forever, at least under one political party. I think we'll continue to see the shift away from hard-line Maoist Communism to a more free version of the political system. Nothing like American freedoms, of course, but enough that the individual chinese will at least be content with it, providing of course that liberalization continues to occur.

[exdubyafan]

No more cheap craps from China? The bright side: the end of black friday stampedes at your local walmart stores.

[gmlaster]

Craps?

[szlevi]

Better yet: KILL WALMART!