China’s economy speaks for itself

Scott Tong Oct 15, 2007

China’s economy speaks for itself

Scott Tong Oct 15, 2007


KAI RYSSDAL: In Beijing today, the Communist Party Congress has begun. Delegates were treated to a two-and-a-half-hour opening speech from President Hu Jintao, in which he talked lots of politics, not so much economics.

Marketplace’s Scott Tong is with us from Shanghai to right that wrong — Hey, Scott.

Scott Tong: Kai, how are you?

RYSSDAL: I’m all right. So listen, the party congress is nominally a political event. But as with so many things in China these days, there’s economic stuff behind it. What is the economic story here?

Tong: Well, they’re quite happy with 11 percent growth in China. The problem is that growth has created a number of side-effects, and President Hu Jintao wants to implement what he calls the “harmonious society” to get at some of those side-effects. Pollution, a big problem in China, and distribution of wealth is something that he’s really concerned about as well. The issue is to not just have economic growth at all costs, but to improve the quality of economic growth, as some people put it.

RYSSDAL: Well, how’s he going to go about that?

Tong: What he’s doing is passing a whole lot of laws and policies. But the problem is, they’re hard to implement at the local level. And the local guys, their incentive is to have economic growth at all costs, because that’s what they’re promoted on. Think about the process we all love here at Marketplace, the annual performance review… Well, imagine if about 70 percent of your promotion was just based on how many whatevers you created — show me the money, what are you numbers. Well, that’s how it tends to work in China. So these local officials in some cases employ slave labor, or they allow factories to create bootleg DVDs. Or factories that cut corners, like use lead paint instead of the more safe stuff.

RYSSDAL: What you’re talking about — the word you’re not using, though — is corruption.

Tong Well, that’s right. When you talk to people on the ground in China — in the villages, etc. — what they say is, for all the small enterprises all around China to stay in business, they give the local officials a little cut. And the local officials kind of look the other way to allow it to happen. And in some cases, you have to pay off the local official because they control access to land (or) access to capital in China. Now, having said that, if China sounds like the most corrupt country in the world, that’s probably not true. The non-profit Transparency International just came out with a ranking of corruption around the world, and out of 179 countries, China was tied for 72 with India.

RYSSDAL: Bring this full circle for me, with the thing we started with — that 11 percent year-on-year growth. How is what any of what the central government does going to influence that growth, if really it’s local officials who are doing all the shenanigans and pumping out all the widgets and all the pollution.

Tong: Well, what the central government is trying to do is to — it’s going to sound boring, but they’re hiring more bureaucrats to try to implement a lot of these policies and a lot of the laws that they’ve passed. But the truth is, as you say, China is very decentralized and it goes all the way back to Deng Xiaoping. And more than 20 years ago, when he decided that the way for China to grow is to allow the local officials, these provincial officials, to have the freedom to go out and try new things and to experiment. And you have to say it’s worked. This economic miracle of China is largely because the government has decentralized and allowed provinces and the cities to go out and find the best ways to grow the economy in China.

RYSSDAL: “To be rich is glorious” — right?

Tong: Well, everyone here is working on it. You can certainly hear that in Shanghai.

RYSSDAL: Scott Tong in Shanghai for us… Thank you, Scott.

Tong: All right, Kai, thanks.

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