[SERI REPORT]Dangerous rungs on China’s social ladder

Can China keep growing as it is now doing for the next decade or two? That is the question raised over and over again by numerous economists and commentators. But that question will be ultimately answered by none other than the Chinese themselves, especially by fiercely motivated young people with soaring aspirations.
What a traveler today to a major Chinese city finds astonishing are cranes soaring everywhere for high-rise construction. That looks unusual even to the eyes of someone from Seoul, our bustling city notorious for being in perennial construction mode.
The capital city of Beijing is already filled with tall, glittering buildings with names such as Sinopec, China Telecom and Bank of China attached to them.
It doesn’t seem, however, that those buildings were erected with the market in mind. Rather, they look like creations from the minds of bureaucrats busy commissioning grandiose projects as big as their own egos.
Come to think of it, it would be a huge problem if those office buildings and those under construction were left wanting for occupants, chasing after profit-seeking businesses and merchants in an oversaturated real-estate market.
That is precisely the problem Harvard historian Niall (pronounced “Neal”) Ferguson pointed out in his Sunday Telegraph column (“China Is Simply Too Busy Getting Rich to Worry about Democracy,” Oct. 2, 2005) after he traveled to five Chinese cities.
He said in his column that the Chinese government cannot get away with running the ultimate contradiction in terms ― “the socialist market economy” ― for long, primarily because of its inherent inability to funnel private savings to productive investment as efficiently as the market can.
For this reason, he predicted, the banking system will one day crash under the weight of mounting bad loans now estimated to be in the range of $160 to $900 billion, or 7% to 40% of the gross domestic product, depending on whom you ask. With it, the country’s runaway growth will screech to a halt sometime soon.
When that happens, the young people of China who have thus far been tolerant of “slight” corruption and infractions on their freedoms, partly because of ever-expanding economic opportunities and expectations of better lives, will rise up on a scale and intensity unimaginable to the Tiananmen Square generation.
This is a very plausible scenario, given that Chinese youths under the age of 24 make up about half of the country’s total population and that they are more than eager to do anything to break away from poverty.
That eagerness is palpable on the faces you see on the downtown streets of urban China.
The young faces are everywhere: in shops, restaurants, tourist attractions and dingy back alleys. Most of these faces may look bored and expressionless ― faces worn down by minimum-wage jobs ― but crying out wordlessly that they could do much better.
Indeed, most of the youngsters I saw were bright looking with eyes full of purpose, reminiscent of the young hardworking factory workers of Korea during the era of industrial development in the 1970s.
For the Chinese, however, there are so many things that could go wrong in the process of climbing the social ladder. The possibility of a banking crisis that Mr. Ferguson amply illustrated in his column is one thing; there is also the problem of rapid environmental degradation, and possibly a disaster coming from industrialization at breakneck speed.
As China needs more and more resources to fuel its burgeoning economy, it will inevitably face the depletion of important resources, including energy, water and timber.
Another outbreak of a pandemic comparable in size and severity to SARS, such as the much-feared bird flu, can disrupt the movement of goods and people to and from the country, further exacerbating China’s already-vulnerable economic situation.
In addition, geopolitical tensions in relation to the Taiwan issue may at any moment blow out of proportion into a full-scale regional conflict.
Under these circumstances, the Chinese government has a truly difficult job ahead, taking care not to interrupt the momentum of growth while being careful in directing the powerful energies of its young population to productive use, or at least keeping them from becoming destructive.
That responsibility, of course, rests primarily on the nation’s government and leaders.
But we in Korea are also partly responsible because China is already our biggest trading and investment partner, as well as the tourist destination most frequently visited by Koreans.

* The writer is managing editor of SERIworld, Samsung Economic Research Institute’s English-language Web site. The views expressed in this column are the author’s and do not represent those of Samsung Economic Research Institute.

by Sangho Chung