What They Won’t Tell Us About China’s Economy

China Rises: Getting Rich

New York Times Documentary (2013)

Film Review

“How China Backs Its Enormous Economic Success”

China Rises purports to uncover the secret of China’s phenomenal economic success. It traces the massive migration of rural peasants into scores of newly fabricated cities and industrial centers. Of the thousands of new factories springing up over the last thirty years, half are privately owned and half are state owned enterprises. Most manufacture consumer goods (clothes, electronic gadgets, shoes, textiles, heavy appliances, household goods, toys, watches) for export.

The filmmakers attribute China’s economic miracle to their newfound openness to private enterprise and their ridiculously low wages. At the time the documentary was made, the average Chinese wage was 60 cents an hour for a 12 hour day. By the end of last year, this had increased to $1.69 an hour Rising Chinese Wages

Most of the film focuses on the lavish lifestyles of China’s most famous self-made millionaires. There are also several interviews with rural peasants who have migrated to China’s designer cities to work. Most are extremely grateful for the opportunity to earn money to lift their families out of extreme poverty. Women, however, tend to be sad about being separated from their children – their earnings aren’t sufficient to bring them to the city, so they are cared for by grandparents in the rural villages.

The film also features segments about China’s emerging middle class learning to pamper themselves and China’s rampant knock-off industry, specializing in counterfeit luxury items, fake birth control pills, fake antibiotics and even fake milk powder. The latter caused 54,000 Chinese babies to be hospitalized (six died) in 2008.

Ignoring the Real Reason for China’s Stellar Growth

What I find most significant about this video is what it leaves out. In fact, it totally ignores the main impetus for China’s phenomenal growth – namely a monetary policy that doesn’t rely on borrowing money from private banks.

As of February 2014, China had only borrowed a total of $US 823 billion from foreign banks – about  9% of GDP. In contrast, the debt the US owes to private banks is 101.5% of GDP.

Unlike most western economies, 90% of the loans used to finance businesses and government services originate from China’s government-run central bank.* Bloomberg’s refers to it as “Chinese-style” quantitative easing, ie the Chinese government is creating the money out of thin air, rather than borrowing it from private banks (and paying them interest to create it out of thin air).

This differs from US-style quantitative easing in that the Chinese government spends the money they create directly into the economy instead of handing it over to private banks.

Despite Obama’s recent attacks on China for “weakening their currency,” neither the President nor the corporate effort make any effort to explain exactly how the Chinese are doing this. The explanation is actually fairly simple: pumping more yuan/renminbi into the Chinese economy causes inflation and weakens the currency’s value in relation to other global currencies.

The corporate media glosses over these details because they don’t really want Americans to understand where US dollars come from – that 97% of the dollars in circulation are created by banks out of thin air and loaned to us at interest. Or that depending on private banks to create and control our money supply is a big reason for our current economic crisis. See Stripping Banks of Their Power to Issue Money

They especially don’t want us to realize there’s an alternative – government-issued currency by a government owned central bank – nor that it’s working miracles for the Chinese economy.

*Contrary to popular belief, the US central bank, aka the Federal Reserve, is a consortium of private banks overseen by a government appointed director (Janet Yellen).

China’s Air Pollution Crisis

Under the Dome: Investigating China’s Smog
Chai Jing (2015)

Mandarin with English subtitles

Film Review

This intriguing documentary concerns a Chinese journalist’s investigation into China’s longstanding problem with particulate air pollution. In addition to examining underlying causes and resulting health problems, Chai Jing reports on the total powerlessness of the Ministry of Environmental Protection (EMP) to force private or state-owned industries to comply with Chinese environmental laws.

Some two dozen major Chinese cities experience dangerous levels of particulate air pollution most days of the year. According to researchers, this air pollution causes 500,000 premature deaths a year. Pollution-related cancer deaths have increased more than 400% in 30 years.

China’s Over-reliance on Fossil Fuels

All agree that China’s air pollution crisis stems from over-reliance on fossil fuels. China’s rate of fossil fuel consumption is three to four times greater (per capita) than either the US or Europe. They burn more coal per year than all other countries combined.

According to Chai Jing, coal burning power plants and steel mills and over-reliance on improperly refined diesel and gasoline are the main source of China’s particulate air pollution.

Failure to Enforce Environmental Laws

China has strict laws requiring factories and coal merchants to wash brown coal (lignite), as well as regulations requiring coal burning plants to install chimney scrubbers. Neither are rigorously enforced. Chai Jing interviews Ministry of Environmental Protection officers who have no authority to shut down or penalize or recalcitrant factories. This authority rests with municipal officials who are too fearful of backlash from factory owners and their employees to take action. They claim manufacturers can’t afford pollution controls and that shutting factories down will hurt the economy and cause workers to be laid off.

Chai Jing challenges this attitude, owing to two years of overproduction of steel, houses, commercial buildings and highways. Heavy steel manufactures who are stockpiling steel they can’t sell still receive government subsidies. The head of the Chinese Central Bank refers to them as zombie companies. Worse still, they continue to expand and drive Chinese peasants out of their homes.

The Chinese construction boom is also a major factor in fossil fuel consumption and air pollution. Owing to corruption and lack of oversight, Chinese authorities have allowed 3.4 billion new homes to be built for a population of 1.3 billion.

Vehicular Pollution

Vehicular pollution is a major problem in China, owing to the government’s failure to develop adequate public transport and widespread use of high sulfur oil from Iran. Unlike Iran, Chinese refineries don’t have the technology necessary to reduce the sulfur content of the oil they use to manufacture diesel and gasoline. According to one government official, they can’t force Sinotec (China’s state-owned oil refinery) to upgrade because it “might interrupt the fuel supply and cause instability.” Likewise there is no effort to force vehicle manufacturers to comply with laws requiring them to install emission control devices.

China Needs to Cut Emissions by Half

Chai Jing estimates China needs to cut emissions by half to reduce air pollution to levels that don’t endanger human health. Yet for some odd reason the solutions she proposes make no mention of President Xi Jinping’s recent commitment to increase China’s reliance on solar and wind technology. Instead she calls for expanded natural gas exploration and the replacement of China’s single natural gas company with multiple private companies. This, she argues, will bring about reform through “free market competition.”

Background on Chai Jing’s documentary identifies it as “self-financed.” Given the recent assault of US fracking companies on New Zealand, I wouldn’t be terribly surprised if one or more of them provided financial backing for this documentary.

Other recommendations she gives – for better monitoring and public disclosure of environmental crimes and increased public involvement in local environmental legislation and increased citizen monitoring – are clearly a step forward.