JAMAICA WOULD probably love to have China's economic problem. The Chinese economy grew by 9.7 per cent in the first quarter of this year, continuing a trend of the last few years which makes it one of the fastest growing economies in the world. In a Reuters interview last week, Premier Wen Jiabao said China was committed to forceful measures to cool its dangerously fast-growing economy which has been a powerful stimulus to global growth, but is now reaching the potential to drag down growth in the international economy.
So desperate are we to have some growth in the Jamaican economy, that even an anaemic one or two per cent growth for a quarter is cause of song and dance. Despite the huge and growing debt burden, the Minister of Finance has been upbeat in the run-up to, and during, the Budget Debate that we are poised for more significant growth in this fiscal year. The largest single investment in the bauxite sector coming on stream recently, some new developments in tourism, loans made available to the small and medium-sized business sector by the Bank of Nova Scotia are some of the signals that growth may defeat the inhibiting factors this time.
The impact of Chinese growth has been felt in our own economy. Steel prices have moved sharply upwards due to Chinese demand on the world market. One of the most important indices of the condition of the local economy is the state of the construction sector. Steel prices are likely to place a damper on activity in this labour-intensive sector. Cheap Chinese goods are flooding our open market. The United States and other major players in the world economy have sharply criticised the Chinese currency policy of a fixed exchange rate, which, it is argued, is keeping the value of the yuan artificially low, making Chinese goods cheaper than those of competitors on the world market.
China, of course, politically remains a communist state committed to central control while allowing elements of its economy to operate by free market rules. The Soviet Union went that route with the Perestroika and Glasnost of Mikhail Gorbachev. The opening of the economy led to the opening, or more precisely the collapse, of the political system. The end result of a similar experiment in China, Cuba and Vietnam, among the last few communist regimes, is worth watching for.
The impact of China on the world economy was forcefully demonstrated last week as Premier Wen's words on corrective action to cool the overheating economy immediately pushed down prices in metals markets. Among the steps to be taken are restrictions on bank lending, on steel and aluminium consumption, and on land use for industrial growth - tools of the state, not of the market. China is still awaiting membership in the World Trade Organisation. While China wrestles with the problem of restraining a high growth rate, we continue to grapple with the problem of stimulating growth.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
