China has been getting hit hard by the US financial crisis and the outlook continues to look grim. Jobs, particularly in southern China, are being lost rapidly. Economic growth estimates have been revised numerous times over the past couple months--the prediction has gone from about 10% to 7%, and could decline further. And, amidst it all, the government is taking action.
Beijing's economic stimulus plan as well as its rhetoric has raised the level of optimism among the some of the public. But, is the plan enough to keep the population employed and complacent? A little over a month ago, a major toy manufacturer closed its doors without warning, owing back wages and causing a furor throughout the country. Another in Dongguan has now closed, sparking a riot of infuriated ex-employees. I have read estimates that millions will be out of work in a year in the Pearl River Delta.
I have heard plenty of predictions as to China's future and economic downfall since arriving here. There were also pessimistic predictions concerning the Summer Olympics. So far, China has proved the naysayers wrong. And it may continue to do so.
This economic crisis poses an incredible challenge to China that it may not recover from in the near future. However, this same crisis may be just what the country needs to take the next step in its development.
Beijing is pushing ahead with infrastructure projects to improve the quality of life and to maintain employment among the growing migrant population. The central bank has also slashed interest rates in an effort to increase investment (though that is more of a short-term fix). Most surprisingly, the government is pumping 350 billion Yuan (more than $50 billion) into environmental protection--though no word yet on what this will include.
The hope is that the difficult times ahead will change businesses. The manufacturers are the ones will get hit hardest unless they adapt. I've heard a lot of preaching from the government about the need for technological advancements, but not much has been developed thus far. This could bring the innovation that is seriously lacking to the businesses on the mainland.
The entire 4 trillion Yuan economic package could change the Chinese economy for the better. Or, it may simply help the manufacturers stay in business long enough to ride out the recession and continue with business as usual in a few years, which won't bring about any long-term benefits for the public.