China's economy: Pay attention to 7 little words

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.

Wen's public pessimism is especially nerve-wracking because 2009 isn’t only the year of the Ox in China. It’s also the year of the anniversary, and numbers play an important role in Chinese culture:

  • Oct. 1 is the 60th anniversary of the founding of the People’s Republic.
  • June 4 is the 20th anniversary of the Tiananmen Square protests.
  • July 10 is the 10th anniversary of the banning of Falun Gong, the spiritual movement that Beijing sees as a threat to its authority.
  • March 17 is the 50th anniversary of the flight into exile of the Dali Lama, the Tibetan spiritual leader.

This strange confluence of dates no doubt has Beijing worried about social stability. So when China’s leadership makes a bold statement like this, pay attention.

It means that the government knows that this economic crisis is creating, perhaps, the most severe test of its leadership since 1949. And since China is now so closely integrated with the global economy, that leadership also knows that it can no longer pretend that everything is fine.

So Wen — speaking at the opening session of the National People’s Congress in Beijing, but also to the world — tried to calm some of these fears.

He set the country’s growth target for 2009 at 8 percent and said Beijing would spend more on social safety nets like healthcare and other programs (though he did not, as was hoped, announce new stimulus measures beyond last November’s $586 billion package).

Will it work? Of course nobody yet knows, though one thing is clear: these are, indeed, interesting times for China and for the rest of the world.

Which leads us to another Chinese phrase with an uneasy connection to Wen’s utterance this week: “May you live in interesting times.”

Unfortunately for everyone involved, this six-word phrase is often meant as a curse.


Other related GlobalPost Commerce stories:

Barbie in the land of Chairman Mao

Why these Taiwanese call their president a liar

Farming (and spending) their way to recovery?

For more on the global economic crisis:Click here for the full report