Washington (AsiaNews) - As the new year 2011 arrives, everyone is concerned about what kind of year it will be. Everyone has already realized that China has reached the end of road for accumulating wealth by relying on providing cheap labor to export goods, which it has been pursuing since the Deng Xiaoping era. China's domestic market has been shrinking relatively, while the disparity between the rich and poor has been expanding, along with expanding damage to the countries it exports to. All these problems have reached their limits.
The reactions from the countries that import Chinese goods have changed completely. By relying on the lobbying of big businesses which make profits from their China deals, it is becoming hard for the Chinese government to maintain this strategy of harming the others in an effort to benefit itself. The trade barriers of various Western countries have gradually increased for several years now. A few years ago, it was still happening in secrecy; the most typical cases were the European countries and Japan. They were using mainly non-tariff measures, such as custom checks and other roadblocks to increase the difficulty for Chinese goods to enter their markets. However, these measures did not really prevent the dumping of cheap Chinese goods, and thus were not able to promote the Chinese government to change its strategy of cheap export instead of expanding China's own market.
Because the United States did not join in with the European model of non-tariff barriers, the pattern of world trade was not fundamentally changed. But, beginning last year, there have been increased pressures from public opinion in the United States. Although the lobbying groups of the big businesses spare no effort to the degree that there are always groups of them waiting to meet the speaker of the House, Congress still could not resist the pressure of public opinion. After all, this is a democratic country, unlike what happens in China where the fate of the whole country is determined by a few leaders. Now, the United States has had to begin taking a tough trade policy.
In this situation, even the Chinese leadership understands that they must make a fresh start. Its strategy of economic expansion must stop. It must enter a normal developing strategy of sustainable development. That means expanding the domestic market synchronized with economic growth, raising the public income level, reducing the growth rate, reducing the gap between rich and poor, and letting the expanded domestic market digest the surplus production capacity resulting from blocked exports.
These processes are the only way to ensure that, in the next few years, China's economic decline will not develop to the extent of the Great Depression of the United States in the 1930's. A direct cause of that depression was the sharp decrease in exports, which resulted in some businesses closing and deflation, followed by a chain reaction of more corporate failures and more workers losing their jobs. As soon as a domino chain reaction starts, it is hard to stop which brought the Great Depression.
China is now in a situation which is very similar to the USA then, but not identical. Back then, the U.S. domestic market was relatively saturated and it was impossible to raise wages rapidly to expand the market. However, the current situation in China is different. Over the years, the wage level has been held down deliberately while the Chinese currency RenMinBi's exchange rate also has been suppressed deliberately. Objectively, there is great potential to expand the domestic market in China. This is the biggest difference from the United States Great Depression in 1930's.
Another big difference is that China is not a real market economy. Its import model is full of non-tariff trade barriers. This policy is now one of the main reasons for the current hyperinflation. Specifically, imports are not smooth, so domestic and foreign markets cannot adjust themselves, yet the currency exchange rate cannot adjust itself either. Once the export growth rate is stopped or reduced while productivity growth has not diminished, inflation is the inevitable self-regulation.
To change this self-regulation model, we must change the unreasonable economic model and stop the rapid economic development which is harming others for itself. In other words, first we must stop the model which accumulates wealth by damaging the interests of ordinary Chinese people. Second we must stop the model which relies on exploiting the markets of the import countries to expand exports, so as to enable both domestic and foreign markets to self-regulate while steadily improving the income of the domestic working-class and expanding the domestic market in China. These policies can resolve hyperinflation in China within one year, and gradually lead China to the road of sustainable development.
This transformation of the economic model is good for the domestic and international economic relations. China's working-class income will be increased, and everyone's real income will increase after the inflation stopped. Thus, ordinary people could be living better, while society would be more stable than it is now. The expansion of the domestic market in China will have a positive result for the aftereffect of future economic development, which would show its vitality within a year or two.
The policies will produce important positive effects on the international relations. Exports to developed countries will be reduced, meanwhile imports increased, resulting in a reduction of trade surpluses, as well as a reduction of trade friction. It will help to restore the economic growth rate of developed countries, thus help pull them out of recession. After a year or two, the markets of the developed countries with their now growing economies will automatically expand their imports and in turn promote China's exports. Thus the whole world could walk out of this economic crisis.
Why is such a happy thing for everyone so strewn with setbacks? Why do not so many economists and government policy makers understand? It is really not that they do not understand, but because they are looking at the issue from a different perspective. These measures will make most people benefit, but big business and their beneficiaries will lose money, so they do not see the benefit, thus could not understand. So it is really not due to understanding, but due to different stands.
A decline in exports is not what some people in China would like to see. These people are the businessmen who make a fortune from exports, and the corrupted Chinese officials who make big money from these businessmen. Therefore, the Chinese Department of Commerce does not want it, and most of the current bureaucrats in different levels do not want it. When high-quality imported goods enter the Chinese market, they will force China's domestic producers to phase-out. The people who will be phased out during the industrial technological concentration and adjusting period, and the local Chinese officials who got rich by consuming these producers of cheap goods do not want it. Of course, the Western big businesses that made a big fortune by monopolizing the market of selling cheap goods do not want it either, including these economists they feed.
This is the true reason behind the phenomena that seems to have made so many smart people in the world become silly. However, the economic status is stronger than these people's will. The democratic society in the West will not allow politicians and scholars to fool the people by pretend silly for a long time. So now the economic recession in Europe and the USA has finally forced the Chinese government to walk out of the hoax it built. The looming economic collapse of China, along with more and more people being in extreme poverty, is also forcing the Chinese government to stop its strategy of harming others for itself.
The expectation now is to see whether the big capitalists in China will be able to wisely accept this reality or not. If they accept it, then everyone will have better lives, except that these capitalists will lose some excess profit. If they do not accept it, then they will collapse with the Chinese Communist Party together. The prospect for them to flee to foreign countries is not very bright, because the Chinese people who have accumulated many years of hatred will not let them run away, and the international society which lost this chance to walk out of their crisis will not accept them in asylum neither.