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SARS haze obscures China's economic
future
By Asia Times Online Staff
HONG KONG - China's SARS epidemic is exhibiting
a general decrease in cases, indicating that it is
coming under greater control. After the World Health
Organization (WHO) lifted its travel advisory on
Guangdong and Hong Kong on Friday, several Chinese media
outlets declared unabashedly that all was well with the
prosperous Chinese economy now that severe acute
respiratory syndrome had passed. However, based on a
glance at domestic and international statistical data,
the situation of the Chinese economy on the whole in
this chapter of China's long-running SARS saga is still
shrouded in a haze of uncertainty. Even if the SARS
epidemic were to disappear completely, a domestic
economic resurgence would require some time.
China's National Statistics Bureau has admitted
that a foreign trade deficit was sprouting at the
beginning of the year, but it emphasized that such trade
deficits during individual quarters or specific periods
of time are quite normal. Moreover, China's trade should
still be in a state of surplus. However, outside of the
country, according to the most conservative estimates,
China's trade deficit for the year will be at least US$2
billion to $4 billion. If this occurs, then it will be
the highest trade deficit in the past decade. In the
nine consecutive years leading up to this year, China's
trade has experienced tremendous surpluses almost fit
for the record books. On the other hand, perhaps this
predicted trade deficit is nothing but a result of a
massive SARS-driven increase in imports of medicine and
medical equipment. What is garnering much attention
these days is the fact that last month alone the total
value of China's imports surprisingly broke the $70
billion mark, setting a new record.
At the end
of last year, the World Trade Organization opened
anti-dumping investigations on 149 items, making China
the country with the most anti-dumping investigations in
the world. This kind of problem puts significant
pressure on Chinese exports, because the inflow of
foreign investment is intimately linked with foreign
trade. Add on the fear of a spread of the SARS epidemic
to other countries and a large number of foreign firms
opting out of implementing their plans for China and
then reconsider the big picture for foreign investment.
It is known that currently a few foreign
investment plans are quietly shifting. The textile
industry is increasingly likely to move to countries
such as India, Vietnam, Pakistan and Turkey; the
electronics industry to the Philippines, Malaysia, etc.
During the past 10 years, the amount of investment that
China has been able to attract increased year after
year, with the ferocious swelling of investment last
year to $52.74 billion, making it the world's top
foreign-investment destination. As for the scope of
foreign investment this year, original optimistic
estimates were predicting as high as a 15 percent surge.
However, in light of this year's developments, these
expectations obviously deserve a major downward
correction.
One obvious indicator of what's in
store for China is Taiwan commerce. In the past several
years, despite Taipei's multifaceted efforts to obstruct
the westward flow of the island's capital to the
mainland, the torrent of Taiwan's investment to China
proved unstoppable. Hundreds of billions of dollars of
Taiwanese capital have crossed the Taiwan Strait in
recent years. Last year Taiwanese investment in the
mainland took up more than half of the island's total
overseas investment. However, in light of the onslaught
of SARS, an increasing number of Taiwanese businessmen
are considering risks in investing on the mainland and
looking to other investment destinations, such as
Eastern Europe, for example. At the same time, as part
of their overall strategy, the island's businessmen are
also planning to move a portion of their companies'
mainland-based production back home to Taiwan.
Additionally, China's projected financial
deficit for this year has already reached $38.6 billion
and the sudden emergence of SARS has forced the
government to increase its expenditures, with the
minimum expenditure for dealing with SARS totaling $1.2
billion. Unfortunately, while expenses are increasing,
production is dropping. China's tourism industry alone
has predicted a total drop for the year of $25.4
billion. Economic growth for this year is expected to
drop by at least 1-2 percentage points. Hence many
international experts are estimating that this year's
financial deficit will undoubtedly exceed $42.3 billion.
Under both internal and external pressure, it is
an indisputable fact that although the Chinese
government altered its definition of "unemployed", the
unemployment rate is continuing to ascend. Employed
people whose income falls below what "guarantees the
lowest standard of living" can also be considered
unemployed. Those whose work time falls under the legal
definition of full-time employment are considered to be
"not fully employed". Under this new definition, current
official data, which put the unemployment rate at 4.1
percent, will be revised to a large extent. At the same
time as all this, urban and rural salaries are
increasing and the labor force has reached its peak. Add
on the tens of millions of unemployed Chinese in cities
and towns and the 150 million surplus laborers in the
countryside, it is obvious that Beijing is in a very
tough spot to say the least.
At present, the
Chinese economy is coming out from the shadow cast upon
it by its SARS epidemic. However, the trend of China's
economic development is already exhibiting some
weakness. The lifting of the travel advisory on
Guangdong province and Hong Kong by the WHO does not
mean that China's battle with SARS is over. If China's
situation were to mirror that of Toronto's and it were
to have another sudden explosion of infections, the
Chinese economy getting back on track would not happen
any time in the foreseeable future.
Translated by Christopher
Horton
(Copyright 2003 Asia Times Online Co,
Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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