Platt Perspective on Business and Technology

China and its transition imperatives 3: considering challenges faced 2

Posted in book recommendations, macroeconomics by Timothy Platt on February 21, 2014

This is my third 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 and Part 2.)

The basic thrust of my discussion in Part 1 of this series was to at least raise the question as to the levels of reserve funds that the government of the People’s Republic of China actually has, and certainly where their vast holdings of foreign currency are concerned – when those funds are measured against their more internally facing red ink and deficits as created at a local and provincial level due to development and modernization programs and initiatives. And I followed that in Part 2 with at least the start of a discussion as to how these programs have impacted on the Chinese people, locally and societally. I continue that discussion here, and with a simple seeming question. What has China actually accomplished with its massive local and provincial development effort, as approved and centrally guided by their national government?

• The overall goal is modernization and with an intention of moving China and its people firmly into the 21st century, and China into a position of global strength and leadership. But what have they accomplished in this?

There is no simple answer to that question, and I would suggest that any attempt to provide a simple monochromatic answer to it, favorable or unfavorable, should be met with a measure of doubt and questioning. My point here is that both good, stable results have been achieved that can be built from, and faulty and even fundamentally flawed consequences have been achieved that can only hamper and thwart long-term stability and growth. And I focus here on the later, and with two working examples that are sufficiently wide spread and impactful as to constitute shaping forces for China’s emerging 21st century as a whole:

• Corruption and inefficiency in government sponsored and funded construction, with use of faulty construction materials and with corner cutting in construction practices – and with “excess funding” pocketed by the politically connected, and
• China’s growing and already catastrophic air pollution challenges, here highlighting the incredible air quality scores that have become routine in their major urban areas, and perhaps most notoriously right in their nation’s capital, Beijing.

I begin addressing the first of those two points with the single event that most forcefully moved this complex of issues into global public awareness: the May 12, 2008 earthquake in Sichuan. More than 85,000 people were killed or left missing and presumed dead under the rubble of this disaster. Many of the dead and missing were children, with a large percentage of the area’s schools collapsing in and certainly in Chengdu, the provincial capital. And it immediately became apparent that most of the complete building failures and collapses in the hardest hit areas were in fact in schools and other government built and funded buildings. Privately built structures were damaged in large numbers, but were much more likely to remain standing, and with their occupants safe from more serious immediate injury as a result.

The way that government funded and built structures systematically fell, killing their occupants in large numbers, became immediately apparent and both within China and to the outside world. And it immediately came out that many if not most of those failed government owned and constructed buildings were constructed using faulty materials such as defective concrete. Defective concrete, made from mixing too little cement with too much less expensive sand, and from using low quality cement to start with, has become a recognized national scandal throughout China, and with both governmental and privately built structures at risk, including dams and bridges and buildings, including skyscraper construction (see, for example, Poor-Quality Chinese Concrete Could Lead to Skyscrapers Collapsing, and I add that real concerns have been raised as to the quality of materials that were used in constructing the dams for the Three Gorges Project as well.)

The second bullet point issue that I noted above was that of air pollution, and to set the stage for this portion of this posting, I offer a general reference piece of pollution problems in China. And for a more focused reference, I cite a book:

• Schwela, D., G. Haq, C. Huizenga, W.-J. Han, H. Fabian and M Ajero (2006) Urban Air Pollution in Asian Cities: Status, Challenges and Management. The Stockholm Environmental Institute.

Air quality has continued to deteriorate at an alarming rate since this book was written and published and for Beijing and across wide swaths of China, with much of this pollution coming from overuse of soft coal in electrical power generation, and from massive increases in the numbers of internal combustion engine vehicles on their roads.

Both of these sets of challenges stem significantly from a lack of planning for long-term consequences, and from a failure to look beyond the immediate project and to its wider impact. It has even been argued that some of the public space buildings that failed in the 2008 earthquake would likely have failed from severe weather events if the earthquake has not taken them down first. But even if the points that I raise here are true, their perspective is so limited and they are so incomplete as a basis of explanation as to be fundamentally inadequate. I am going to at least begin addressing the why of this in more detail in my next series installment where I will write of China’s open economy, its black market economy and its in-between gray economy. And more specifically I will write about Mao’s legacy and the continuing burden that it imposes on China and its leadership.

Meanwhile, you can find this and related postings at Macroeconomics and Business.


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