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中國經濟的保險係數

Watch out for the friendly skies of China?--Tom Plate looks for the safest flight plan for China's economy

Tom Plate

Friday, July 28, 2006

Some time in the eighties, like a lumbering jumbo jetliner, packed with more than a billion people and untold historical baggage, China began to move forward. Inch by inch, then yard by yard, then mile by mile, struggling to gain ground speed, this giant finally, slowly, almost miraculously began to take off. Struggling with all that weight, it gradually lifted skyward.

And then, sometime in the nineties, the Chinese economy actually began to soar -- and at a respectable cruising altitude. By the new millennium, it had come to be fully airborne, seemingly stable and cruising along.

But let us hope that this historical anomaly never runs out of jet fuel. If it does, it would probably drop out of the sky and plummet to earth faster than you can say -- oh --"Summer Olympics."

But precisely such a crash-and-burn scenario was postulated few years ago by some honest and concerned Western pessimists, not to mention by the usual mixed bag of China-bashers and ill-wishers. But as the months rolled on and the Chinese economy continued to roar with consistently astonishing growth rates, another fear surfaced: Though it would not crash and burn, the Chinese economy would inevitably have to come down to earth for a landing -- for rest, repairs and a refuel.

The only question was: Would the Chinese landing be hard or soft? Would the inevitable pause be disruptive and painful, perhaps with negative economic ripple effects throughout East Asia (if not the world)? Or would the landing be smooth, almost businesslike, causing very little disruption or economic dislocation at all?

Only a few economists went against the grain of the conventional wisdom. Only a few  boldly tip-toed around the question of whether China would have a hard or a soft landing by predicting that its economy would have no landing at all -- it would just keep on soaring.

And that -- as fate would have it -- was exactly what happened. This economy just won't stop. Sure, some day it might: After all, a successful flight path is not at all preordained; and, we know, with China, if its checkered history tells us anything at all, it tells us that almost anything (especially the unpredictable) can happen.

Until now, however, the problem is not whether the Chinese game plan is good, the question is whether it is a little too good. Just the other day Wen Jiabao, China's overall number two, raised his hands as if to suggest that China needs to slow down a little.

He told China's powerful State Council that the economy has become so hot that the government may need to hose it down with specific cooling measures. Wen warned that "forceful measures must be taken to help resolve the striking contradictions that exist to prevent rapid economic growth from becoming overheated."

To stretch the jumbo-liner analogy to the limit, Wen worries that China's air speed could morph into the shakily supersonic and the government will lose its ability to pilot the plane, making substantial changes of direction very difficult, if not impossible. No one can predict, after all, what unexpected turbulence or uncharted mountain ranges lie ahead for the Chinese ship of state. Smashing into one of them at top speeds could prove far worse than even the hardest of hard landings on the bumpiest runway.

Westerners listening to Wen's important speech might be led to hope that China will now decide to let its currency become more valuable in comparison to the American dollar as part of the premeditated cooling-off process. And this is indeed a possibility: It was always obvious that Beijing was not going to re-value its dollar simply because the U.S. Congress pined for it with such evident and open devotion, but would only do so when such a significant and inherently risky monetary move was in its immediate national interest.

It may be that this epochal revaluation moment is drawing closer, but there is a serious worry that must be honestly faced.

The problem is that the Chinese leaders do not know how much they can throttle back on the controls without the overloaded aircraft losing minimum air speed and falling into a downspin. This Chinese economy is clearly if anything unique; there are no existing flight manuals, if you will, that offer the guidance of precedence.

What in fact would be a minimum air speed? Throttle back too much, and you may wind up unintentionally triggering the biggest economic crash since 1929. Throttle back not at all or not very much and -- well, what?

Well, what? Some inflation, some rising prices, etc., etc. But at least the giant jumbo jet stays in the air, cruising forward, getting re-fueled mid-air.

What we are suggesting here is that no one really knows how to fine-tune this historically unprecedented economy. So China's leaders, by their nature rather cautious, probably won't try to do too much. And that, in fact, may prove the safest flight plan.

 
 

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