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China's economy: Pay attention to 7 little words

In a culture of nuance, China's leaders opt for the direct approach.

China's Premier Wen Jiabao delivers his government work report at the opening ceremony of the National People's Congress at the Great Hall of the People in Beijing, March 5, 2009. (China Daily/Reuters)

BOSTON — “We are facing unprecedented difficulties and challenges.”

Those seven words – uttered March 5 by Chinese Premier Wen Jiabao – represent the most important economic news of the week. And that’s saying a lot in a week where unemployment in the United States jumped to a 25-year high, stocks on Wall Street fell to a 12-year low, the beleaguered European Central Bank lowered interest rates to a record low, and industrial production dropped 17.2 percent in Brazil, the biggest monthly drop ever.

Chinese leaders are rarely, if ever, so blunt about their economic worries.

But play close attention to what’s happening in Beijing and across China, where 20 million migrant workers are already out of work, exports are falling fast due to slumping global demand, and where annual GDP needs to hit 8 percent for the economy to absorb a growing workforce, a dubious goal in 2009 to say the least.

As we’ve been arguing here at GlobalPost, conditions are increasingly ripe for social unrest. China’s rapid economic growth – GDP has surged tenfold since Deng Xiaoping’s economic reforms of 1978 – has created millions of richer Chinese who are now suddenly losing what they’ve worked so hard to achieve.

And that could be a recipe for trouble, especially since China has not done a good job of building the kinds of safety nets – unemployment insurance, health care, housing and other social welfare programs – that help most developed countries cushion the effects of an economic downturn.