Chinese President tells party to get ready for a rough ride from world recession

The Chinese President has issued a rare warning to the ruling Communist Party, telling his officials that the global economic downturn is so severe that it could shake its 59-year grip on power.

President Hu Jintao’s remarks, at a weekend meeting of the ruling 25-member Politburo, appeared on the front page of the party’s official mouthpiece, the People’s Daily. It was his bluntest message yet delivered on the crisis to China’s 1.3 billion people and more than 70 million members of the party.

The subtext of his speech was the increasing risk of social unrest caused by China’s rising unemployment, as a slump in exports leads to factory closures and a fall in property sales results in abandoned construction projects.

The President, who is also the head of the Communist Party, said: “In this coming period, we will starkly confront the effects of the sustained deepening of the international financial crisis and pressure as global economic growth clearly slows.” He said that the slowdown would “steadily weaken our country’s traditional competitive advantages”.

The speech is the most authoritative warning yet of the blow dealt to the world’s fourth-largest economy by the international financial crisis. Tens of thousands of migrant workers at failed factories are already heading back to their farms, and economists say that the real drop in export orders may not be felt until early next year.

Mr Hu said: “Whether we can turn this pressure into momentum, turn challenges into opportunities, and maintain steady and relatively fast economic development … is a test of our Party’s capacity to govern.”

It is unlikely that the President expects a challenge serious enough to force the party from power. But his warning is evidence of anxiety over a threat to social stability, and is almost certainly a reminder to regional authorities that they must maintain order by stepping in to resolve popular grievances. Protests over factory closures, particularly in the most developed southern coastal zone, have erupted in recent weeks.

Most have involved enraged workers, as their employers skip town and leave their wages unpaid. But the tens of thousands of others heading back to their rural homes for the Chinese new year in late January could add to the threat if they cannot find new jobs in the cities on their return. China’s top economic planner, the chairman of the Cabinet’s National Development and Reform Commission, gave warning last week that the impact of the global financial crisis was worsening and that rising job losses could fuel instability.

China’s leadership has said on several occasions over the past decade that popular anger over official corruption poses the most serious threat to continued party rule. It is unusual for a government that has placed the economy above ideology for three decades and which has ensured sharply rising incomes to issue such a stark alert over living standards.

The message that people may not be able to expect greater prosperity with each passing year is a particularly unpalatable one for the party to deliver. Since the death of Chairman Mao and the end of the ultra-leftist chaotic Cultural Revolution in 1976, the party has effectively based its legitimacy on its ability to guarantee growth. The urban middle class has largely focused on Deng Xiaoping’s exhortation that “to get rich is glorious”, setting aside any demands for more checks and balances on Communist Party rule.

The party had begun to shift its focus towards more equitable growth and greater environmental sustainability, but this shift may face pressure as officials scramble to shore up growth – and jobs. The Government has unveiled a 4 trillion yuan (£381billion) fiscal stimulus package to counter the global financial crisis. Some of those funds – pre-allocated under other programmes – are already flowing into the economy.

President Hu said that it was now more urgent than ever to transform China’s export-driven, resourceirresponsible development, although growth was also more crucial than ever. “Under current conditions, we must keep an even tighter focus on economic development,” he said.

Knowing that China can no longer rely on exports, the Government is eager to boost the domestic consumer demand that was a major engine of growth in the 1990s. A nationwide rebate scheme to encourage rural residents to buy more refrigerators, washing machines, colour televisions and other domestic appliances will be expanded to 14 provinces from today and nationwide from February.

December 1, 2008
Jane Macartney in Beijing

Source: The Times

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