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Stunning China growth, but
how much longer?
China’s economy grew by 11.9% in the
second quarter of this year. Financial newspapers and analysts
called the result “stunning” – the highest growth rate in 12
years.
An economist with Hong Kong’s Chartered Bank, Tai Hui, was quoted
as saying the figure was “very much in the stratosphere” and that
the Chinese government would be reluctant to admit the economy was
overheating even though inflation hit 4.4% in June.
China’s economy (US$2.7 trillion in 2006) is poised, in the
current year, to overtake Germany (US$2.9 trillion) to become the
third biggest economy, having overtaken Britain in 2005.
Many analysts and international agencies are upgrading their
forecasts for China, but some economists at the Australian
National University’s recent ‘China Update’ seminar were concerned
that structural impediments to double-digit growth are looming.
Labour shortages looming?
The question had already been raised during the China Update
session in 2006 about the possibility China would run out of its
seemingly endless flow of cheap labour, as signalled in ANU’s book
The Turning Point in China’s Economic Development.
Prof Ross Garnaut told this year’s seminar a recent study of 3,000
villages in 17 provinces “indicate that 74% of the villages no
longer have any surplus labour available for employment in distant
cities.
“The ‘labour shortage’ began in coastal areas but has now spread
throughout the inland,” he said, noting that a Green Paper on
Population and Labour published by the Chinese Academy of Social
Sciences in June this year suggests that China would be ‘short’ of
labour by 2009.
Wages of rural migrant workers have grown by 2.8% in 2004, 6.5% in
2005 and 11.5% in 2006 and it was important for the Chinese
government to reduce barriers to internal labour migration.
Prof Garnaut says regional data is suggesting a marked wages
acceleration in a number of poorer Chinese provinces such as Hubei
in the central region and Ningxia in the west, along with a
deceleration in the high-income coastal provinces of Zhejiang and
Guangdong.
Another paper by the ANU’s Xin Meng and Nansheng Bai of the School
of Agricultural Economy and Rural Development at Renmin University
in Beijing says the sustainability of China’s 15 years of
unprecedented growth depends very much on whether the country has
exhausted its surplus rural labour.
In contrast to the Garnaut thesis, they suggest that payroll data
from seven large manufacturing plants show the wages of unskilled
labour “have not increased significantly, if at all”.
They said China’s high growth rate had reflected “large scale
movement of surplus labour from the low-productivity rural sector
to the high-productivity urban sector.
“Rural-urban migration provided Chinese industries with cheap
labour and facilitated the rapid growth of labour-intensive
manufacturing exports.”
The environmental ‘nightmare’
While experts may be somewhat divided on availability of cheap
labour, there is little question environmental impediments to
growth are assuming nightmarish proportions.
Ligang Song, who with Garnaut co-edited their latest book, China –
Linking Markets for Growth, provided an overview of the Chinese
government’s assessment last February of the impacts of global
climate change.
Petroleum globally became the biggest contributor to greenhouse
gas emissions in the 1970s, moving ahead of coal, but the converse
remains true of China, which this year overtook the US to become
the world’s biggest emitter of greenhouse gases.
Nevertheless, taking into consideration the decade to 2000,
China’s total emissions constituted 7.2% of global emissions
versus 28.9% for the United States.
Song said the rate of emissions from China has undergone almost
exponential growth since 2000 due to rapid economic growth and
continued dependence on coal (2005) for 69.6% of energy needs and
oil for 21.1%.
Even though China’s per capita energy consumption remains very
low, it could be a key reason why global carbon dioxide emissions
which international experts want to cap at 550 parts per million,
versus about 430ppm now, could be reached by 2030 instead of the
targeted 2050, he said.
In that eventuality, China estimates that average temperatures
could increase by two degrees Centigrade.
Having risen in China by 0.5C to 0.8C between 1900 and 2000, the
Chinese government is forecasting a rise of 1.5C to 2.8C by 2030.
In that eventuality it predicts that China’s agricultural output
could fall by 5-10%, raising serious concerns about food scarcity.
Water flows into the strategic and historic Yellow River dropped
36.6% between 1960 and 2000 and experts predict that per capita
water resources will plunge from 2,220 cubic metres to 1,760m3 by
2030 – close to the 1,700m3 mark below which China would be deemed
‘resources poor’.
China has to face the enormous environmental challenge, alongside
the dilemma of a premature end to high economic growth rates.
 
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