China has become an economic powerhouse in Asia and throughout the world. The nation's stimulus package far outstrips the US. The socialist nation places people before banks.
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15:23 Mecca time, 12:23 GMT
China puts people before banks
China is one economy where there is no disconnect between the financial and normal world
Samah El-Shahat, Al Jazeera's resident economist, writes a regular column analysing key elements that have contributed to the global financial downturn and its impact across the world.
The one question that isn't going away this global recession, is whether China can save the world.
But before we go running to Beijing, hat in hand, demanding assistance or else, there are some home truths that need to be considered first.
China is a developing country, with a per capita income of $4,000, which is much closer to those of African economies than to the US per capita income at $39,000, and $33,000 in Europe.
China has 130 million people who still live in absolute poverty, and even electricity hasn't made it every household yet.
So why should China be asked to save anyone but itself right now?
In fact, as Michael Pettis, a professor at Beijing university's Guanghua School of Management says, China's consumption was about the equivalent of France's last year, but no one is calling on Paris to save the world.
The crisis, though, has exposed and clearly magnified the fault lines in China's emerging economy of 1.3 billion people.
The Asian giant needs to nurture its own domestic demand, so that when the export market goes sick, like it has in this Great Recession, it doesn't drag China down with it.
But making her people spend more than they save is harder said than done. After all, less than a generation ago the Chinese were so poor that hunger was the accepted norm in their daily lives.
Tiger has risen
Speak to Chinese officials in their late 40s onward and they will tell you that thinking about food was a major preoccupation as they were growing up - it was so scarce and many had to collect food coupons.
Yes, this Asian tiger has risen despite a recent past of malnutrition. So getting the Chinese to move away from the "survivors'" mentality of savers to one of spenders will not be easy.
Economists believe it takes a whole generation before people can change their ways and habits. But such a change can be overwhelmingly helped by the establishment of social welfare and safety nets such as health care provision, and other forms of social security.
This might encourage the Chinese to loosen their purse strings.
So why do we assume China can save the global economy?
Is this not a warped sense of economic prioritising to ask a developing country with pressing economic and social problems of its own to come in and sacrifice herself for the rest of the world?
Lending the US
This could have something to do with China's $2tn in denominated securities, and bonds it has acquired from the US. It is after all the US's biggest lender.
Yet, take that two trillion-dollar sum and divide it by 1.3 billion - the Chinese population - and I assure you not much would be left for your average Chinese citizen.
However, I feel this basic misunderstanding of China and her position in the world, has to do with our negative bias toward that country - we are much tougher and harder when it comes to the way we report our economic stories on China.
We are not telling enough stories of how we can in fact learn from China, particularly in the way its keeps the power of its banks in check.
Something we have been unable to do.
China is the one leading economy where the divide - the disconnect between its financial sector and the world normal Chinese people and their businesses inhabit - doesn't exist.
Both worlds are booming again and this is due to the way the government handled its banks.
China hasn't allowed its banking sector to become so powerful, so influential, and so big that it can call the shots or highjack the bailout.
In simple terms, the government preferred to answer to its people and put their interests first before that of any vested interest or group.
And that is why Chinese banks are lending to the people and their businesses in record numbers. Why don't we hear more about that in the media?
COUNTING THE COST
In the UK and US, the financial sector is booming, while the world of normal people seems to be going from bad to worse, unemployment is high, businesses are folding and house foreclosures are still taking place.
Wall Street and Main Street might as well be existing on different planets.
And this is in large part because banks are still not lending money to the people.
In the UK and US, banks have captured all the money from the taxpayers and the cheap money from quantitative easing from central banks.
They are using it to shore up, and clean up their balance sheets rather than lend it to the people.
The money has been hijacked by the banks, and our governments are doing absolutely nothing about that. In fact, they have been complicit in allowing this to happen.
I asked Costas Lapavitas from the School of Oriental and African Studies (SOAS) whether governments had put the interests of banks before the interests of their wider populations.
"Yes I think you can say that. I think governments will probably come out and say that we helped rescue the banks, and we prevented generalised collapse. And to a certain extent that is true of course," he said.
"However there were so many ways in which banks could have been rescued and this particular way has been done in such a way that the banks have no incentive to change the ways they operate ... It is as if the banks have written the policies that the state adopted."
Interests of shareholders
The US and British governments have allowed banks to solve their own crises in the interests of their own mangers, and shareholders – they are after all private business.
Governments should have made it conditional for banks to lend to us, before they are given access to so much of our money and the Federal Reserve's cheap credit.
So the Western hemisphere is suffering the consequences of government failure, while the Asian Giant is celebrating government getting it right.
Funny, how our seemingly democratic governments have been taken over by vested interests.
So, lay off China. It is the one country that is putting the interests of its people above that of the banks.
And in these pressing times I say Hallelujah to that.
Samah El-Shahat also presents Al Jazeera's People & Power programme.
The views expressed in the above column are the author's own and do not necessarily reflect Al Jazeera's editorial policy.
Source: Al Jazeera
Monday, August 10, 2009
16:12 Mecca time, 13:12 GMT
Zimbabwe's 'special' relationship
By Haru Mutasa in Harare
In the absence of Western investment, Zimbabwe has relied heavily on Chinese trade ties
As direct foreign investment from the West dried up over the past few years, Zimbabwe's economy started to go into free fall.
When the US and several EU countries spoke out vehemently against a land redistribution programme that saw white commercial farmers and their farm workers removed from the land, the Zimbabwean government looked to its old friend China for aid.
China and Zimbabwe have a history of co-operation, dating back to Beijing's support for the military campaign Robert Mugabe, Zimbabwe's president, waged against white rule in the 1970s.
China continued to help prop up Zimbabwe's economy even as other foreign investors fled in recent years due to the forceful land redistribution programme and national elections in 2002.
At the time, Western observers had said the elections were marred by wide spread vote-rigging and violence against opposition supporters.
The Western economic sanctions on Zimbabwe increased Harare's reliance on China for imports of telecommunications, road building, irrigation and farming equipment, as well as a host of other critical items.
Chinese firms have contributed, sold or bartered arms, aircraft, buses, and hydroelectric generators to their African ally.
China is also said to have supplied building materials for Mugabe's lavish mansion in a plush Harare suburb.
Chinese benefit?
As payback for standing by Mugabe during turbulent times, China siphons out millions of dollars worth of precious minerals.
Zimbabwe has the second largest reserves of platinum in the world and other precious metals, like gold and copper.
And the African nation has potentially billons in yet-to-be-exploited natural resources like coal-bed methane gas, huge coal reserves and immense hydroelectric power potential - as well as chromium, nickel and copper.
China is also a major consumer of tobacco and its companies have been given huge tracts of fertile land in Zimbabwe to grow the leaves and other agricultural products.
China's voracious appetite for these natural resources has resulted in its disbursement to Zimbabwe of soft loans with no-strings attached.
Zimbabwe has used these loans to finance schools, clinics, roads and other infrastructure.
In June, Morgan Tsvangirai, Zimbabwe's prime minister, said an official had secured lines of credit worth $950m from China.
Zanu-PF, Mugabe's party, had mocked Tsvangirai, Mugabe's main rival, for failing to bring home much aid from his tour of the US and Europe earlier this year.
Zimbabwe's government needs an estimated $8bn to rebuild the country's ruined economy.
Western countries have been wary of giving the government large amounts of cash, calling on Mugabe to halt alleged human rights abuses.
As the majority of Zimbabweans are poor, the country has become a big market for cheap Chinese products.
There are over 40 Chinese-run companies in Zimbabwe making a profit.
One store Al Jazeera visited sells products for as little as $0.16, and is always packed with customers.
Broken promises
A Chinese firm was given the contract to complete the Matabeleland-Zambezi water project - a dam meant to supply water to over a million people in the parched region.
Some $600mn is needed to finish the dam, which would take two years to complete if the money were available.
State funds to complete the dam dried up in 2007, and there is no indication that the $950m line of credit secured from China last month is being channelled toward it. But the dam has to be completed so people can grow more food.
Dumiso Dabengwa, from the Matabeleland-Zambezi water trust, says: "It should have been done yesterday. We started working on this project in 1990. By 1997, it [was] approved by government, and it's supposed to be done as a matter of urgency. Up to this day, we still haven't [finished]."
Analysts say China is under no pressure to help Zimbabwe finish this project. Zimbabwe needs China more than China needs Zimbabwe
"Had there not been a power like China that threatens to be the next super power to parallel with the United States," says Brian Badza a political analyst in Harare,.
"I think by now, Zimbabwe could have been part of history, [and] by Zimbabwe, I mean the current administration."
Who loses out?
While China and some politicians seemingly benefit from this cosy arrangement, ordinary Zimbabweans lose out.
Black farmers who benefited from the land redistribution programme struggle to get a good crop because the region is so dry.
Sheila Chinhamo, a Zimbabwean farmer, grows maize, ground nuts and rears cattle in the dry Matabeleland region.
"It has food shortages. Last year people, were dying of hunger," she tells Al Jazeera. "There was hunger last year - because of the rains."
Chinhamo says she does not believe the dam, which the Chinese are working on, will ever be completed.
Meanwhile, Chinese businesses continue to permeate Zimbabwean society.
The secretive nature of both the Chinese and Zimbabwean governments makes it difficult to know how the deals are being drawn up.
And it's impossible to know how much of the country Mugabe has mortgaged off to China in exchange for political and financial support.
Source: Al Jazeera
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