Ho-fung Hung
Economists and policy advisors both within and outside China have always thought that the best course of action is to boost domestic consumption. It is theoretically easy to do. There have also been figures in the Chinese government talking about the need to increase the share of domestic consumption in GDP, from Zhu Rongji in the 1990s to Wen Jiabao in the 2000s and Li Keqiang more recently. But if you look at the data, while domestic consumption may be growing in absolute terms, it is actually stagnant or falling as a share of GDP.
Economists and policy advisors both within and outside China have always thought that the best course of action is to boost domestic consumption.
There’s a reason why that structure is so difficult to transform. China was integrated into a global neoliberal trading system, coordinating very well with the US. This dates back to the 1970s, when organized labor was becoming more powerful in the US and other Western countries, demanding higher wages, while at the same time there was more pressure for environmental protection, with the formation of bodies like the [Environmental Protection Agency]. The environmental and labor costs of production in Western countries were rising.
This created an opening for China to join the trading system and solve the problem of falling profits for Western capital, because the country offered low labor and environmental protection costs for enterprise. Ever since the 1980s, Western capital has been able to escape the empowerment of workers and stricter environmental regulations by moving production to China.
This is the secret of China’s success: it could offer Western capital, and later homegrown Chinese capital, favorable conditions that you could not really find anywhere else in the world. Even in Southeast Asia, although incomes are low, you have elections and independent…
Auteur: Ho-fung Hung
