OPINION> You Nuo
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OPINION> You Nuo
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Time for all to adjust, not live in vain hope
By You Nuo (China Daily)
Updated: 2009-04-06 07:48
Business commentators in China tend to be a spoiled bunch of people. Having been so used to double-digit, if not close to 20 percent, year-on-year growth in almost every industry, few of them are prepared to acknowledge the difficulties the country may now be facing. It is a rare crisis and will most probably last much longer than the world expects. A longer crisis and a more painful recovery could mean more ups and downs and no clear indication as to when the worst will be over. Of course, people hope it will all end soon. But in reality, if enough work is not done to address the causes of the present crisis, barriers to recovery simply won't go away. The power supply data for March, released last week, fell short of expectations that they would indicate an early turning point. Power supply bears wider significance, showing the demand from industries driven by the immediate orders for their products and services. A net decline in power supply was recorded in most of the country, more markedly between the Pearl River Delta and the Yangtze River Delta. That is where most of China's export-oriented industry, the powerhouses of the nation's economic development, is based. With discouraging power supply reports, some people are wondering why the giant stimulus package the central government rolled out last November has yet to brighten prospects for overall industrial growth. Should the central government be enlarging the stimulus package - such as by allocating more bailouts, or designing more tax incentives, to ailing industries? Local governments in coastal cities certainly wish that would happen. They may think they rightly deserve more stimulus funds because their cities have generated so much for China's GDP growth since the 1990s.
However the central government may be thinking otherwise. It may ask itself, first of all, whether it should not act so hastily when the overall circumstances remain the same as several months ago, if not still worse. In fact, as one may reasonably argue, some of the changes in the global market may never allow China's coastal industry to return to profit by remaining the way it was. At least for the next few years, world demand will not resume former high levels. In a prolonged crisis, coastal companies can hardly afford to think wishfully that someday all economic problems will go away and consumers in developed countries will begin to spend as recklessly as they did in the past. Meanwhile, to win over domestic consumers, they will have to devise innovative strategies along with different products and services. Such a change may be hard without the assistance of mature commercial networks from abroad. In the end, only very few creative companies can emerge a winner, while many other companies will disappear after failing to understand uncertainties in the domestic market. At the same time, heightening safety and environmental regulation will add further costs to existing coastal industries. They will have to learn to cut down pollution and use less resources. In due course, some old production capacities will be phased out more quickly than many people can now foresee. It would be helpful if some think tank or economic research team compiled a report showing how much the cut in power supply is attributable to the weak export market, and how much to the closure of wasteful and polluting operations. Governments in coastal cities cannot afford to keep appealing for lenient policies from Beijing while slowing down the restructuring of local industry that is inevitably needed. They should compete to restructure early as intensely as they used to vie for overseas investors and buyers. To that purpose, Beijing practically can do nothing to help them. E-mail: younuo@chinadaily.com.cn (China Daily 04/06/2009 page4) |
