The End of Chinese Miracles?
The world’s biggest annual migration is on the way. As part of the Chinese New Year celebrations, millions of Chinese workers are traveling this week from major cities like Beijing and Shanghai to their homes in the countryside. This is the most important holiday for Chinese people. Unfortunately, according to many, there is not much to celebrate this year, as they might not have their jobs when they get back.
As consumer demand is collapsing globally, China’s economy is contracting like the rest of the world; an economy that has been booming for the last five years largely due to their exports. We painfully watch and see that no one is immune to the global financial crisis, not even the world’s fastest growing economy. This situation has left many analysts questioning the Chinese miracle, which seems to be over now.
Over the last five years, China has been enjoying unprecedented levels of growth, mainly based on exports. However, as consumer demand is rapidly plummeting globally, China is facing challenging times ahead. Today, despite huge sales and clearances, retailers can not attract enough customers. The bottom line is that high spenders have run out of money. Governments around the world are implementing policies to prop up key industries by offering them tax cuts or subsidies. They are also trying to stimulate the economy by pouring money into economic stimulus packages to revive domestic consumption. The global economic crisis is being addressed Keynesian economic policies, with the government’s involvement in the economy. The invisible hand is now the government’s hand, and as the 44th President of the United States stated in his inauguration speech on Tuesday, the government is now the solution, not the problem.
The Chinese party officials are aware of the urgency of the situation and they know that they have to act fast. Fearing major social unrest, Chinese officials are easing their monetary policy and also implementing a fiscal spending plan. The United States also is concerned about the situation in China, as China is the largest foreign holder of US Treasuries after Japan. The head of the National Bureau of Statistics in China recently said that he is confident that China and other Asian countries will maintain economic growth. Also recently, Jeffrey Sachs, the Director of the Earth Institute at Columbia University in New York showed his confidence in China and Asian economies.
Africa’s challenges are obviously different. Millions of Africans die each year of preventable or treatable diseases. Countries are in the midst of civil wars and violence is only likely to get worse. Environmental resources are being depleted with a soaring population. There are 27 countries in Africa needing urgent external assistance. Nevertheless, Africa is also highly dependent on other economies, especially China. The rate of China’s contribution to Africa’s economic growth has been fairly high at around 5%, compared to other major advanced industrial countries of the world. Thus, the health and stability of China’s economy concerns every single nation in the world from the most advanced industrialized to the less developed.
Remaining as one of the most reputable and reliable importers, suppliers, and distributors in the West African region, the Saranabu Sa, a Lebanese family business, is feeling the effects of the global financial crisis first hand. Mr. Ramses Najem, one of the co-founders of the company, stated recently that the economic situation is the worst in the last 15 years. Like many other businesses in the region, they are hit by the crisis as commodity prices and export markets are declining sharply worldwide, along with reduced investment in the Continent. It is becoming impossible for African economies to protect themselves against the worsening economic condition. If the world fails to act, Africa can get only worse, not better.