China must grow - or it risks riots

23:09, Apr 29 2009

If China has problems caused by the slowing of its economic growth, they are not obvious on the streets of Beijing and Shanghai.

Smog still fills both cities, the streets are full of shoppers and massive construction projects are under way.

In Shanghai, the Pongdu region across the river from the old city is speckled with cranes adding ever larger towers to the already futuristic skyline.

The factories, foundries and smelters in Shanghai's satellite cities still belch smoke.

But, in a sign of the times, much of the work is part of the government's attempts to feed China's voracious hunger for economic expansion.

Shanghai is building new infrastructure to support next year's World Expo including the venue, a network of new motorways and other projects.


Beijing is building a giant canal to feed the region's need for water and planting huge forests to try to combat erosion and climate change.

It is a story being repeated across hundreds of cities throughout China – cities most New Zealanders have never heard of, but which are home to hundreds of millions of people.

The government is hoping its stimulus package will work and that shrinking growth will bottom out at 6.1 per cent in the last quarter of this year.

For most Western countries, 6 per cent economic growth would be something to cheer about but in China it is about the lowest it has been since the once state-run country opened up its economy and exploded on to the wider world.

Chinese leaders talk about the need for the magical 8 per cent growth, and this is not just because eight is a lucky number in this country.

It is how much growth is estimated is needed to maintain employment levels high enough to avoid civil unrest.

New Zealanders are keen to picture China as a heavily controlled country, and while this is true, there is dissent and protest, especially in the regions away from the international media's gaze.

Before the economy was opened, rioting about famine was not unknown.

Now, though, the unrest is over the lack of work, employment conditions or other matters such as housing.

The Chinese leadership seems to value political stability above almost anything else and if it takes money to keep people in jobs it seems willing to spend it.

China has become an economic powerhouse in recent decades as it modernised its industry, mobilised its workforce and created a new middle class of millions of consumers.

But it has not been immune from the global recession and its exporters have been hit particularly hard.

China, like most other countries, has embarked on an ambitious stimulus package.

Premier Wen Jiabao said recently that China was "not out of the woods yet", but he had been encouraged by the country's economic resilience.

If he is right, New Zealand and others could be better off. If not, this country and the rest of the world could feel the impacts of the recession for some time to come.