Wednesday, March 4, 2009

Painful Reality

The National People's Congress (NPC) and the Chinese People's Political Consultative Congress (CPPCC) are sitting these few days to figure out how to get the country out of the economic doldrums.

The biggest headache is unemployment and many ideas have been batted around.

There's a government policy to open more spaces for undergraduates to study graduate programs in order to avoid the unemployment crunch, but really that's just delaying the inevitable for another two to three years.

One NPC Deputy, Zhang Xiaomei who is also apparently a well-known businesswoman in China's beauty industry, has proposed a 4.5 day workweek to help employ more people and also help workers have a better quality of life.

She reasons that in the course of a work day, 2.4 hours are wasted and a shorter work schedule would encourage people to work more efficiently.

However, it if entails smaller salaries, some people might not like the idea, whereas others think half a day off doesn't really help that much.

Why is the government looking at bandaid solutions when the crux of the matter is consolidation?

Now is the best time for the country to make some real, definitive reforms to stay afloat. But they would have to be radical, free market changes.

For example, China has 80 car manufacturers. Yes, that's right: 80.

Does the country really need all of them? The United States has the Big 3 and some Japanese carmakers like Honda and Toyota. That's it.

And the Chinese car companies are partially state-owned , with the heads running these firms as if they were their own personal fiefdoms thanks to guanxi.

If the market were less government controlled, then these automakers would have to sink or swim, thus quickly consolidating them into one-third or even one-quarter the total. From there, these mergers and acquisitions can pool together their collective brain power and start creating innovative designs and environmentally-friendly cars.

The same goes for food production, steel, energy, textiles... the list goes on and on.

China should really stop coddling its industries and let them stand on their own.

That's the only way they'll know how good their brands are compared to the rest of the world, and how they are going to improve their quality and competitiveness that would make Chinese people proud to buy domestic instead of imported.

But no, in these anxious economic times, the government would rather have stability over painful reforms.

And as a result, it has given rebates, cut taxes, handed out coupons, ordered companies to retain staff even if they financially can't, and made universities open more classes for unemployed fresh graduates.

In the short term, the numbers will make China's economy look good, but in fact, it will become even more bloated than it already is.

And eventually, it won't be able to take it anymore and perhaps will implode.

Is that worse, or cutting the apron strings worse?

1 comment:

Anonymous said...

I'm sure the benefit is the median wage.