Not Quite Adding Up

Top policymakers are in Beijing this week at the annual Central Economic Work Conference to discuss how China is going to reach 8 percent GDP growth next year.

In the third quarter this year, the country's economy slowed to 9 percent, the first time it dropped from double digits in five years.

However projections for next year are anyone's guess. The World Bank recently gave an estimate of 7.5 percent, which the Chinese refuse to acknowledge as a possibility which is why they are aiming to make 8 percent growth.

Some Chinese economists are even predicting 9 percent, with a surge in the second half of 2009, which by current indications doesn't seem likely.

Also, it seems the central government is still figuring out where all the money for its 4 trillion RMB ($856 billion) stimulus package will come from. On November 9 it just announced this gobsmacking huge amount, with no details.

It later turned out that most of the infrastructure projects the money was for are already in progress or already earmarked, and so the government was lumping everything together and not much was new in the package.

Also it was later revealed the central government is only kicking in 1.18 trillion yuan in the next two years and then expecting provincial and local governments, banks and private enterprises to pick up the balance.

While building infrastructure is good in a time of economic slowdown, it doesn't really do much to stimulate consumer spending. But it may line corrupt officials' pockets and anyone involved in infrastructure development.

Meanwhile, people's salaries are too low and only when their wage levels go up would they feel confident in spending. What the government should have really done was invested more in social welfare systems, including health and education, and actually look after its people.

But there are optimistic economists out there who think China can change its economic structure, of which 60 percent was from exports last year, to 40 percent by 2020. And they want domestic consumption to make up for 75-80 percent of the country's GDP by 2020.

How realistic is that in 12 years?

While China has grown by leaps and bounds in the past 30 years, it's not going to improve that significantly in a decade unless its government makes drastic changes in its economic model. That means doing away with state-owned enterprises of SOEs that are constantly propped up by the government, sound banking and financial systems that are transparent, and allowing free enterprise to really take hold and and dominate the economy.

But is that really going to happen?

With strikes, riots and social unrest spreading through the country, the government is more keen on preserving its authority than having the foresight to really move China forward.

It may take a miracle for China to reach 8 percent GDP growth or some numbers may be fudged...