Platt Perspective on Business and Technology

China and its transition imperatives 2: considering challenges faced 1

Posted in macroeconomics by Timothy Platt on February 13, 2014

This is my second installment to a new series on China and its recent Party and government leadership transition, looking back over the past year since that formally and officially took place and to now and China’s current situation, and forward (see Part 1: at one year plus, after Xi Jinping’s ascension to power.)

I wrote in Part 1 of China’s foreign currency cash reserves and of its mounting and matching local and provincial governmental debt, and ended that by posing some fundamentally important questions:

• What has driven this massive accumulation of local and provincial debt?
• And what has been done with this money, and what issues and challenges that are arguably of pressing societal importance have been overlooked in this rush to spend?

The answer to the first of these questions, at least as a matter of top-down Party and government policy is clear and simple: a drive towards rapid modernization that is considered essential if China is to credibly claim a position of global leadership, and with necessary growth and development fueled by their overall business and economic performance and from their influx of wealth from that, paying for this – at least in principle. And China has undertaken multiple simultaneous massive urban and rural redevelopment programs and across the span of their country, in undertaking this nationally organized and led effort.

• This has involved moving over 250 million members of China’s peasant population from rural and primarily agricultural communities into their cities where in most cases they lack the skills needed to find and secure anything beyond menial and unskilled labor work (see Migration in China and China’s Great Uprooting.) For the first time ever, China’s urban populations now exceed their rural populations as a result.
• This has meant systematic destruction of traditional and even historical urban residential areas (see for example, Cultural Heritage and Urbanization in China.) In some urban centers as much as 90% and more of China’s traditional courtyard design residential buildings have been leveled and replaced with newer architecture, and principally with high rise apartment buildings. This has, among other things, meant the complete dismantling of entire socially and family based communities with the traditional community-based support that they provided for their residents.
• This has taken place all over China and not just in developing and redeveloping their select special economic zones: specially selected urban development areas that are intended to both serve as hubs for economic development and as showcase examples of China’s development progress.
• And of course any list of this type would have to include the massive development efforts that went into preparing for the 2008 Summer Olympics, held in Beijing, China. This was viewed in China and by its Party and governmental leadership as their country’s opportunity to prove itself as a superpower to the world. For scale if nothing else, their 2008 Olympics stand out for its scope and impact, but it has been policy to find and pursue avenues and opportunities to highlight China’s strength and sophistication and as a matter of highest political and governmental policy, and with large scale urban reengineering and redevelopment entering into all of this with entire local neighborhoods and communities leveled and their populations relocated to make way for this progress.
• And any such list would be far from complete if it did not also include mention of at least one of the massive rural development projects taking place in China, and an obvious choice for that is their Three Gorges Dam project which, as massive as it is, is only one part of a still larger project that seeks to tame essentially the entire Yangtze River. The Three Gorges Dam project, to continue discussion of that part of this larger enterprise, had created problems that even China’s national government has had to publically acknowledge, including pollution and environmental damage, complications from large scale forced population relocation and the complete destruction of entire communities, and the emergence of geological problems.

I am going to continue this discussion in a next series installment where I will look into some of the issues that have arisen as this redevelopment has taken place, and with redevelopment funds redirected into the pockets of the politically connected and with way too much of the construction involved in this carried out without regard to quality considerations, through cutting corners on both materials used and on construction practices. And I will also discuss China’s still actively growing environmental crises, including as a showcase example, Beijing’s air quality problems. Meanwhile, you can find this and related postings at Macroeconomics and Business.


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