Is China growing too fast? A swelling chorus of policy makers and commentators, both domestic and international, seem to think so. Yet despite the apparent consensus on the subject, the situation is actually extremely uncertain, even contradictory.
To begin with, what exactly is the problem? Rising price inflation? Over-investment? Capacity constraints? All these possibilities are regularly mentioned, but they do not yield a coherent picture.
The difficulty is that these various symptoms of “bubbling?or “overheating?cancel each other out. If capacity constraints are the problem ?electricity shortfalls and blackouts figure prominently here ?then additional investment is exactly the solution required. The same applies to price inflation (which has nudged up a little to something over 3 per cent) since reinforcing the supply side of the economy will put a downwards pressure on prices and intensify competitive forces. If there is a real problem in this entire tangle, it is the diversion of investment into relatively non-productive sectors such as real estate rather than infrastructure and productive businesses.
Cooling down the economy suddenly sounds appealing to all kinds of people, but it is worth remembering that such “cooling?amounts to the deliberate destruction of opportunities, jobs and social resources. If the only way to optimize medium-term growth is indeed to inflict short-term austerity, then a case can be made for it, but this would scarcely be a cause for celebration. Even if short-term inhibition of GDP growth is on occasions necessary, growth foregone is nevertheless the very essence of social misfortune.
With a strange popular frenzy emerging for slamming down hard on the brakes, a very simple truth seems at times to be getting lost: Growth is good. It seems to a bemused outsider at times as if China must have its own cultural variant of masochistic puritanism, a collective desire for the penitential abnegation of prosperity and all its works.
In this weird climate it is becoming surprisingly controversial to chant the basic economic mantra “growth is good and GDP measures it best?or to assert that optimizing medium-term GDP growth is the key to social development. Yet any drift away from GDP as a measure of economic achievement is a return to arbitrary central planning, with subjective and ideological criteria of wellbeing replacing consumer spending power, real preferences and choice.
That is why United Nations “quality of life?indices always end up promoting the status of semi-stagnant welfare states which look appealing to bureaucrats but which offer few real opportunities to their inhabitants, stifle human creativity and contribute little to overall planetary prosperity ?let alone excitement, vibrancy or freedom.
China has real economic problems to tackle, financial sector reform, industrial restructuring and mass urbanization foremost among them, but high growth rates are the exact opposite of a problem ?they are the sole general purpose solution. If economic analysts have plausible reasons to think China is incapable of achieving sustainable double-digit GDP growth, they certainly haven’t made their case yet.
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