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Feeling the Chill in China

Updated On: Dec 01, 2008

THERE are reasons not to go to China in winter. The cold is bitter, especially in the North this year. Almost everyone comes back with the flu or cough. Concerns about food safety leave you wondering what is safe to eat and what isn’t.
Yet the plane from safe, warm Singapore to Beijing is full.

One Singaporean I met was on the way to meet mainland officials in charge of food and drug safety. Another, running a household Singaporean name in Chinese medicine, was visiting the Traditional Chinese Medicine academy in Beijing. A third, well known former civil servant Ngiam Tong Dow, was travelling to speak at a Chinese entrepreneurship conference.

The plane is full not because people love to visit China. It’s full because China is full of opportunity and need. For years, the Chinese economy has been the hottest source of growth and dynamism, pulling along many others to form a regional production platform with exports to the markets of America and Europe.

As recession hits the developed economies in the United States, Europe and Japan, some hope that China can do something to offset the expected downturn.

Yet, just as temperatures are dropping sharply, could the hot Chinese economy be getting cold? And, with the storms in global financial markets, could this be more than a seasonal downturn?

Projections are that China will still grow at about 8 per cent in the coming year. This is considerable, compared to developed markets which are expected to face slow or no growth. But China is not unaffected.

Some factories are closing, notably in the Pearl River Delta where costs have risen, and among uncompetitive state-owned enterprises. Industrial output has slowed to a crawl, the lowest in seven years. Real estate prices are softening in many cities. Lower Chinese demand for energy and resources have driven down commodity prices worldwide.

A slowdown in China was already anticipated after the summer Olympics and with the unfolding crisis, China’s economy is feeling the effects.


I felt this viscerally when I visited the town of Langfang, a 90-minute drive out from Beijing. The town has a light industrial park, a university and a growing new town for residents. An American electronics manufacturer occupies a huge block in Phase 1 of the industrial park, complete with housing for the workers.

There were ambitious plans to grow. But demand in America and the electronics sector has slumped and expansion has slowed. Beyond phase 1, some structures remain incomplete, and although more land has been cleared, some stands empty.

On the Sunday I visited, workers were out strolling. The area is one of the poorer provinces and is thus a source for low-cost labour for major cities. The industrial park is just one of the many projects that have to succeed here and across China if there are to be enough jobs.

That’s one reason why Chinese leaders rolled out a stimulus package worth nearly US$600 billion ($917 billion). The Chinese will spend on infrastructure, and not bail out companies, in the name of protecting jobs. But a lot of the motivation is to keep up growth, provide jobs and avoid unrest.

Recent weeks have seen a number of protests in China by taxi drivers, workers and assorted crowds. Protests pop up now and again in different parts of the country, but bear particular attention in this period of downturn.


Long before this crisis, Chinese thinkers emphasised how the country needs a benevolent international environment to allow it to focus on domestic development and deal with issues like jobs and inequality.

External economic conditions have grown harsher than winter and China will be tested by these tough times. China needs to keep growing for both economic and political reasons.

The world can gain from China’s continued growth. An economically healthy China can continue to hold US Treasury Bills, contributing in this way to financing stability abroad. A growing China will continue to have needs and will therefore offer opportunities to all who come with a marketable product. Many multinationals, for example, can anticipate participating in building infrastructure in China with the stimulus package.

Some hope that China can and will do more. A few troubled countries have already come to Beijing, hoping for bilateral assistance. Others want China to contribute more to the multilateral financial agencies, like the World Bank.

Chinese leaders have responded by saying that their best contribution is to keep growing. Investing to build up its own infrastructure seems a sound investment of the country’s considerable reserves.

To keep its own economy growing may sound selfish to some. But I read it as a realistic admission that while China is a rising power, it is not yet there, and it is not vouchsafed against turbulence.

Imagine the opposite scenario: A China that is overstretched abroad and troubled at home, economically stagnant and with restive citizens causing instability. Sometimes helping others begins at home.

Simon Tay
About the author: 

The writer is chairman of the Singapore Institute of International Affairs. He was in China as Singapore’s representative on the Asean Regional Forum’s register of expert and eminent persons.

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