DATE=12/13/1999
TYPE=BACKGROUND REPORT
TITLE=YEARENDER: CHINA ECONOMY
NUMBER=5-44971
BYLINE=ROGER WILKISON
DATELINE=BEIJING
CONTENT=
VOICED AT:
INTRO: China's economy this year was slated to register a
respectable seven percent growth, despite underlying
problems including inefficient state enterprises, low
consumer spending, banks plagued by bad loans and a rising
unemployment rate. But, as V-O-A Correspondent Roger
Wilkison reports, Beijing's rulers took a giant step to
further open up their economy to the foreign competition
they believe it needs by striking a deal with the United
States that will pave the way for China to join the World
Trade Organization.
TEXT: Last month, Chinese Premier Zhu Rongji stood before
a group of Philippine businessmen in Manila and trotted out
China's economic indicators for 1999.
//ZHU ACTUALITY (IN CHINESE)// ESTABLISH AND
FADE
Mr. Zhu painted a favorable picture: seven-point-four
percent growth for the first nine months of the year, an
increase in both exports and imports and a whopping 152
billion dollars in foreign exchange reserves. He also
sought to dispel fears in the rest of East Asia that China
might devalue its currency, saying there is simply no need
for such a step.
Days before Mr. Zhu's appearance in Manila, China signed a
landmark deal with the United States that some economists
say is Beijing's most significant economic move since its
adoption of market reforms 20 years ago. Under the accord
-- which clears the way for China to join the World Trade
Organization -- Beijing is obligated to make market-opening
moves that it was unwilling to even consider a year or two
ago. But for Charlene Barshefsky -- the U-S trade
representative who negotiated the deal on Washington's
behalf -- the agreement's significance is that it commits
China to abiding by the rule of law.
//BARSHEFSKY ACTUALITY//
The W-T-O is a rules-based trading regime. It encompasses
almost 140 nations and the rules -- basic rules on
transparency, non-discrimination, judicial review,
administrative independence -- are absolutely critical to
the functioning of a modern economy.
//END ACTUALITY//
Analyst Ken Davies -- of the Economist Intelligence Unit in
Hong Kong -- says China's entry into W-T-O is also a
recommitment to economic reforms within China and
strengthens the hand of those in the government who are
leading that process.
//DAVIES ACTUALITY//
They've been trying to reform the economy in the past
couple of years, and they've run into some domestic
obstacles. They've also been trying to speed the economy
in trying to restore rapid growth. And that, again, has
run into the ground. So what this does is to tackle the
entrenched problem of state-owned enterprise reform and
provide the possibility of faster growth in the longer
term. Now that means a lot of short-term instability
because of unemployment going up, but in the long term it
means more rapid growth and, therefore, more jobs for young
people coming on to the employment market.
//END ACTUALITY//
Membership in the W-T-O will be painful for some Chinese
industries, especially agriculture. It has already
infuriated the leaders of some ministries who see their
interests threatened -- notably the Ministry of Information
Industry, which oversees telecommunications and the
Internet and has resisted foreign participation in both.
Bureaucratic resistance to the changes -- both at the
ministerial and the local level -- is expected to be
widespread. But President Jiang Zemin and Premier Zhu are
convinced that only through exposure to foreign competition
will Chinese enterprises be able to hold their own in the
global economy.
The leadership is gambling that jobs lost through greater
foreign competition -- estimated at 11 million over the
next seven years -- will be made up through much higher
levels of foreign direct investment, which has been
declining over the past two years.
One stumbling block in China's efforts to create new jobs
is its banking sector. State-controlled banks continue to
dole out money to state-owned enterprises producing goods
that nobody will buy, instead of lending to private
enterprises that could be expected to create new jobs. As
unemployment grows, consumers afraid of losing their own
jobs refuse to spend. So the government has relied on
massive infrastructure spending to fuel the economy. But
it knows it cannot do so forever.
Political scientist Wenran Jiang of the University of
Alberta in Canada says the communist government's
legitimacy depends on maintaining the high economic growth
that has brought prosperity to many Chinese over the past
20 years.
//JIANG ACTUALITY//
I think they have decided, if you do not have eight percent
annual growth, you're in trouble. Just look at the number
of unemployed -- the inequality between the countryside and
the cities, and the gap between the rich and the poor, both
within the urban areas and in the countryside. Without a
good eight percent continuous, sustainable -- they always
talk about sustainable development -- without this, they
will be in trouble.
//END ACTUALITY//
Mr. Jiang says China's leaders are hoping they can muddle
through the turbulent economic and social adjustments they
face in the short term as they gear up to reap the benefits
of full-fledged membership in the world economy that lie
ahead. (signed)
NEB/RW/GC/WD
13-Dec-1999 05:20 AM EDT (13-Dec-1999 1020 UTC)
NNNN
Source: Voice of America
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