China: National People ’s Congress reflects regime’s fears of social instability

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China: National People’s Congress reflects regime’s fears of social
instability
By John Chan
8 March 2010

At two major conferences that began last week, the Chinese ruling
elite was preoccupied with the political dangers posed by the
country’s acute social tensions: the widening gap between rich and
poor, growing unemployment due to the crisis in the export sector and
housing distress associated with sharply rising property prices.

The annual Chinese People’s Political Consultative Conference (CPPCC),
an advisory body mainly representing China’s business elite, including
from Hong Kong and Taiwan, opened last Wednesday. The more powerful
National People’s Congress (NPC), which is the country’s formal
legislative body, started proceedings on Friday.

Premier Wen Jiabao’s report to the NPC last Friday reflected
nervousness over economic and social instability. While the economy
expanded by 8.7 percent in 2009, the growth was dependent on a huge
stimulus package, including a vast expansion of credit that has led to
speculative property and share bubbles. None of the underlying social
and economic contradictions has been resolved.

Wen acknowledged that China was still facing “a very complex
situation” in the global economy. Warning that unexpected crises could
strike again, Wen said: “We must not interpret the economic turnaround
as a fundamental improvement in the economic situation.” He pointed to
the dangers of further financial turmoil as well as the impact of
trade tensions and protectionism on China’s export-dependent economy.

For 2010, Wen set a growth figure of 8 percent and a limit on bank
loans of 7.5 trillion yuan ($US1.09 trillion). The targets are an
attempt to maintain stimulus spending to offset weak demand for
Chinese exports, while reining in frenzied property speculation that
threatens to trigger a crisis in the financial system. According to
the State Statistics Bureau, total real estate sales were 36.769
trillion yuan in 2009, an increase by 80 percent from 2008. An NPC
delegate from Chongqing, Chen Wanzhi, estimated that real estate
developers reaped profits of more than 1 trillion yuan last year.

CPPCC member Pan Qingling told China Securities last week that housing
affordability in Beijing is now worse than in Tokyo. “One million yuan
($147,000) could buy a three-bedroom apartment in a rural area about a
20-minute drive from downtown Tokyo, but a similar apartment in
suburban Beijing cannot be bought for the same amount of money,” he
said. China might face a similar collapse in asset values to the one
in Japan during the early 1990s that triggered two decades of economic
stagnation, Pan warned.

Recognising that housing has become a contentious social issue, Wen
promised “to resolutely curb the precipitous rise of housing prices in
some cities and satisfy people’s basic need for housing”. However, the
government is proposing little in the way of concrete action. Wen
promised to build 3 million low-cost apartments and to reconstruct 2.8
million shanty houses this year.

Curbing the property boom is incompatible with the current tax system,
which forces local governments to rely on land sales for revenue.
Local governments earned 1.59 trillion yuan from land sales in 2009,
and half the land was sold to developers. Local authorities actively
fuelled the property boom by providing credit to developers,
accounting for 40 percent of all loans in 2009. As a result, local
government debt rose to 5 trillion yuan last May, equivalent to one
sixth of GDP in 2008.

The official report to the NPC proposes a budget deficit of 1.05
trillion yuan, including 200 billion yuan to assist local governments.
As a proportion of GDP, the deficit for 2010 will be 2.8 percent, up
from 2.1 percent in 2009 and just 0.4 percent in 2008. The relatively
low debt level is the result of rapid economic growth. Any slowdown
would soon force the government to wind back public spending.

Wen declared in his report: “Everything we do, we do to ensure that
the people live a happier life with more dignity and to make our
society fairer and more harmonious.” He outlined increased spending on
rural subsidies, education and a healthcare reform, supposedly to make
it more accessible to working people. He also promised new measures to
“resolutely reverse” the gap between rich and poor, and to restrict
the lavish privileges of officials. Wen even hinted that Beijing might
allow ordinary people to criticise the government for the first time.

In reality, growth in public spending will be cut this year, due to
rising government budget deficit. Public-works investment is budgeted
to increase just 7.3 percent in 2010, after more than doubled last
year under the stimulus package. Growth in social security spending
will slow to 10 percent this year, down from 12 percent in 2009.
Education spending will increase 14 percent, lower than the 16 percent
last year.

Shortly before the NPC, Wen highlighted the regime’s concerns about
social instability in an online dialogue with Internet users. He
promised to distribute social wealth “in an adequate manner”, because
“if wealth in a society is concentrated in a minority of people, this
society will be neither just nor stable.” Wen’s proposals to the NPC
are an attempt to blunt rising discontent over the vast social gulf
between the majority of people and the wealthy elite of top officials
and big businessmen.

As a series of articles in the state-run media last week make clear,
however, social inequality has risen sharply as the Chinese Communist
Party (CCP) has implemented its pro-market restructuring. The income
gap between the richest top 10 percent and the poorest 10 percent in
China is now 23 times, compared to just 7.3 times in 1988.

One study cited by Guangzhou Daily shows that workers’ wages as a
proportion of GDP declined from 51.4 percent in 1995 to just 39.7
percent in 2007. The same study found that wages in China constitute
less than 10 percent of corporate operating costs, compared to around
50 percent in developed countries.

According to the China Youth Daily, online surveys conducted prior to
the NPC showed that 65.3 percent of respondents wanted to increase
wages and narrow the gap between rich and poor; 67.1 percent sought
legal measures to curb official corruption and 63 percent wanted a
full social security system. Some 58.4 percent wanted to elect and
control the CCP and government leaders. Affordable housing, health
care and education were also high on the list of preferences.

The CCP regime, however, is incapable of lifting the living standards
of working people because that would undermine the cheap labour regime
that is the source of China’s economic growth. Any expectations raised
by Wen’s report to the NPC will be dashed as the realities of Chinese
capitalism continue to exacerbate social inequality. An economic
downturn or financial crash will quickly translate into open social
struggles.

http://wsws.org/articles/2010/mar2010/napc-m08.shtml

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