Don't ignore this black swan

There are two types of black swans in the world. These are important and rare events, referred to in Lebanese-American scholar Nassim Taleb's book of the same name. There are black swans that, until they are discovered, people don't know about - like the black swans that had long been living in Australia before they were "discovered" by Europeans.

And there are black swans that, for a certain period of time before they come to their full potential, people see every day without understanding them or realizing their importance. The Aboriginals probably knew about black swans, but so what? They couldn't expect them to be such a surprise to people from elsewhere, even less to become a philosophical term later.

A black swan recently turned up in China's economy, but many observers simply failed to notice it. This took place last month when Vice-Premier Li Keqiang became the first Chinese leader to declare that the new energy and environmental sector is to become a "national strategic industry". In fact, some analysts just poured scorn on this statement.

There are technological bottlenecks, they argued. And there still aren't many large companies in this sector. Some even called the policy announcement "distant water that cannot be used to put out a local fire", meaning that it will do little to lift the economy out of its present troubles.

These analysts are blind. In fact, a comprehensive, new energy program is just what China needs to regain its economic growth momentum, and to sustain that momentum. This is precisely what Vice-Premier Li called for on May 21 at a policy-review seminar in Beijing.

Li said that Chinese leaders have come to see that the new energy, energy conservation and environmental protection industries deserve "focused support" to "expand their economy of scale and speed up product commercialization" - which may well be read as building large companies and putting out new products, green cars, for example.

Currently plagued by the global financial crisis, there can generally be only three scenarios for the Chinese economy - to continue pouring investment into large public infrastructure projects, as Beijing has been doing since last November, to shift the focus of investment to housing and urban development, or to build a new energy industry.

Big-ticket infrastructure projects are an important way of holding the economy back from a major fall. But that's the best they can do. Having more and more of them can be a waste, and may cause some new imbalances.

GDP growth in the coastal cities was generally lower than the rest of the country in the first quarter of the year thanks in main to the fact that they no longer need so much infrastructure funding. But a slowdown in these relatively developed cities may not be a good thing in terms of raising the country's overall productivity.

In the meantime, urban development is basically a local affair. With its continental size, China has never had a full-blown national urban development program. Nor are there national companies - developers or financier - to facilitate the program.

So, as it is, only the energy scenario is the one that is the most likely to work, and more easily manageable and beneficial in terms of productivity. This is the most hopeful scenario to lead China out of the current crisis. Who says it is only "distant water"?

younuo@chinadaily.com.cn

(China Daily 06/01/2009 page2)