III.“A Colossus with Clay Feet?”——the Challenges Confronted by China

Leaving culture and politics aside,the foreigners may have a deeper and more visualized impression on China's economy.It is easy to see these figures in newspapers even for those who haven't been to China.In 2010,China had become the second largest economy in the world.Investment banks like Goldman Sachs hold that maybe in just a decade,China will surpass US and become the world's largest economy.This means that China will become the first economic power in the 21st century.

Of course,there are different interpretations of the same thing.The following is an article published in August 2010 by a European news website and translated into Chinese by an authoritative international newspaper in China and widely reproduced on China's major websites:

In fact,the country presently performs at nearly one hundred times its 1978 levels in the production and services sectors,which translates to an average growth in excess of 14% per annum.A figure that has raised more than a few eyebrows.The quip that“God made heaven and earth,and everything else was made in China”subtly underlines this sentiment.China is presently the largest automotive-industry market in the world: since last year,more cars are sold there than in the United States.And China is also currently the most prolific exporter worldwide,even ahead of Germany.

But do we really need to be so afraid? Didn't we already experience the same sort of apprehensions in the 1980s,when the Japanese gained tremendous ground in the automotive sector,nearly wiping both the United States and Europe off the map? The French and German carmakers,for example,rose to the challenge by stressing their strong points—design,technology and image—while improving on their weaknesses—quality and productivity.The challenge was enormous,but the European brands came out of the fray much stronger than when they were pulled in.

For the time being,China is still a colossus with clay feet.It was only earlier this year that it rose to take its second-place spot among the world's economies,but it is still one gigantic country.In terms of its GDP per inhabitant,the World Bank ranks China at number 127,behind Angola and Azerbaijan.We also shouldn't forget that China is still a developing country,which is why economists are somewhat skeptical that it can maintain its runaway growth for much longer.Just last year,strikes here and there resulted in significant salary increases,which are ultimately detrimental to competitiveness and will tend to slow its precious growth rate.

The Chinese people are very receptive to the metaphor“a colossus with clay feet”. They believe that it is precisely the hugeness of the country that has multiplied the problems.China's problems are much more difficult to solve than any other country in the world.To be honest,the Chinese people's sense of crisis is exaggerated in some respects.In fact,China's problems are not unique,but they need to be solved in more than a billion people.

In the following we will choose several common problems encountered by many countries and find out the reasons for Chinese people's current thinking.

The first is employment.Today,westerners are very sensitive to unemployment.It is the major economic problem in America.For this purpose,the government tries hard to stimulate economy,invest projects,and even adopt protectionist measures to squeeze out foreign competitors.There is a general impression in the world that only the Chinese are leading an easy life at this difficult moment because all the job opportunities are transferred to China.

If you are a Chinese university graduate,you certainly do not agree with this view.In general,you will find it very difficult to find a job in China because there are 6 million people competing with you at the same time.In 2011,there were 6.6 million undergraduate and graduate students graduating from school.Together with more than 9 million people who don't have such a high degree,they rushed to the labor market.If taking into consideration those who failed to find a job before, in Chinese cities,there are more than 24 million people in need of employment in a single year.Even if the Chinese economy could maintain the current growth rate,it can only provide 12 million jobs a year.

Let's use a simple analogy to illustrate these figures: every year,in China,the number of people who need to find a job is almost equivalent to the total Australian population.To this end,China has become the“world factory”,providing employment opportunities at a very low price.But even so,only half of the people are able to settle down every year.This is the competitive situation that an ordinary Chinese worker needs to face.

This is just one side of the coin.On the other side,the“world factory”is now facing an embarrassing problem.Starting from 2010,the coastal factories actually find themselves unable to recruit workers.The blue-collar workers at the bottom of Chinese society are gradually getting tired of the low wages and poor working conditions.If the working conditions could not improve,they would rather give up their jobs in distant provinces to stay in their hometown to make a living.But many coastal factories in China are only original equipment manufacturers for European and American brands.They only make meager profits and are unwilling to pay for the rising labor costs.Thus,in China,there exists a contradictory problem: on the one hand,many people can't find a job; on the other hand,factories are unable to recruit new members.

The second is social security.It is another problem that westerners are so familiar with.The European countries may feel that they adopt too many security measures and bear too much pressure on public finances.While President Obama believes that such a society in America is unjust with millions of people without health insurance.However,he may not know that there are more than 100 million people who don't have any kind of health insurance in China.And among those who do have,the majority only enjoy a very low level of insurance.If they go to the hospital,they have to pay half of the bill by themselves.In China,the government bears tremendous pressure on social security in the fields of health care and education.Coupled with the housing problem,they are called the“three big mountains”by Chinese people.It is not easy to solve these problems among over one billion people.I think Obama should be glad that he is the US president.

The Chinese leaders wake up every morning facing all kinds of livelihood issues.China is the second largest economy now,but the government investment in education and health care is not comparable even to some other less developed countries.The Chinese account for 20% of the world's population,but the total cost of the medical care only accounts for 3%.In 2009,the Chinese government only invested 24.7% of the medical funds.In developed nations,the figure remains at around 75% and even some developing countries have reached 55%.The investment of Chinese government in education also hasn't reached the world average.

Then how did the Chinese government spend all the money? Radical arguments hold that a lot of money had been wasted or corrupted.Waste or corruption is a huge problem,but they certainly can't be the persuasive explanation.The main financial expenditure of Chinese government aims to promote the economic growth: construction of infrastructure,investment in new industries,subsidies for low-income areas and populations.Under the great pressure of employment,the Chinese government must try to maintain a high economic growth rate,which makes the investment in social security lag far behind.Increasingly,the government finds that they have got into some new troubles brought about by the large investment and high growth in recent years.

The third is economic bubble.Today the world economy is experiencing the pain of bubble burst.The financial crisis started from subprime loans and real estate market.Nowadays,China's real estate bubbles have led to widespread concerns.According to statistics,in several major cities in China,the housing price has reached or exceeded the price in Manhattan or Berlin.But the family income of Chinese people is several times less than those westerners.Both the housing price—income ratio and the housing price—rent ratio in Chinese cities have more than doubled the international recognition of a reasonable range.The high housing price has stimulated serious social conflicts and also increased the risk of a“hard landing”of China's economy.

In addition to real estate industry,many of China's basic industries have encountered the problem of over—investment.In 2010,China's steel output was more than 600 million tons,equivalent to the sum of all steel production in other countries.But the excessive steel production has failed to bring more profit to China's steel enterprises.Coupled with the extrusion of advanced international ore giants,the living environment for Chinese enterprises is very arduous.China's coastal light manufacturing industries are also in fierce competition.When international demand declines,a large number of companies have to be shut down.

The Chinese government is struggling to contain China's growing economic bubbles.Once the Chinese bubbles burst,it will bring a new round of disaster to the gloomy global economy.Suddenly,China finds that she bears the global hope of stimulating economic recovery.But China may be overwhelmed.Today's China is already a society divided by interests.Those who have an apartment believe that the housing price should continue to rise,while those who do not have claim that the government should reasonably control the prices.In the case of excess capacity,the new funds in manufacturing industries cannot bring enough profits.Thus a lot of cash is eventually flown to financial and speculative markets,aggravating the decline of manufacturing and increasing the risk of financial system.Some large enterprises unwilling to see the emergence of any open competitors monopolize the industrial resources,and they even exclude the competitive technologies and new industries.Local governments rely on economic growth brought about by investment,in fear of the unemployment caused by economic slowdown.Despite the rapid growth,China still faces conflicts of interests,bickering,uncertainty and the pains and frustrations brought about by them.It is just the same as the recessionary western world.

The fourth is the polarization between the rich and the poor.Economic growth never seems to be fair.Market competitions always distinguish winners from losers,and even many nonparticipants.The higher the growth rate is,the greater the tension brought about by polarization.If you believe that China has experienced successful economic growth, you need to realize that at the same time China has accumulated much tension brought about by the polarization between the rich and the poor.In 1978,the discrepancy of average annual income between Chinese citizens and peasants was RMB 209.8 Yuan.In 1992,it was 1242.6 RMB.But in 2009,this figure reached 12022 RMB. Behind these terrible figures is the problem of inflation.But today,the differences of living standard between large and medium cities in China and the rural areas make them look like being in totally different ages.

The most terrible gap exists between the eastern cities and the western rural areas.In 2009,the per capita income of cities in Zhejiang province is 10 times that of rural areas in Guizhou province.Today,China is the world's second largest consumer of luxury goods and it is said that in 2012 China will surpass Japan to become the first in the world.All of these expensive goods are mostly consumed by tens of millions of affluent urban populations in the eastern part.However,in western China,40 million people live below the absolute poverty line.270 million people are included in the low-income groups by the government.According to international standard,the figure will be even larger.

Today,both the intellectual elites and common people in China not only worry about the widening income gap,but also the inequity concerning development opportunities.Despite the fact that all the students in China need to sit a fair exam to enter university,the education gap between those living in the poor mountain areas and those in the eastern large cities is becoming wider and wider.Statistics show that in the top universities in China,the number of those young people who come from a poor family is shrinking.This is the natural result of economic competition and educational competition.For those poor young people,it seems that the opportunity of reshaping their destiny through hard working is getting smaller.

You can imagine that those young people who use the most fashionable products in the world and whose parents have several housing properties live in the same world with those who can only finish their studies by borrowing money from others and may face unemployment right after graduation.In such a society there exists hidden instability.The international society considers the Gini coefficient as an important measurement of income inequality.It is generally believed that when the Gini coefficient gets above 0.4,it indicates that the income gap is too large.According to the official Chinese statistics,the Gini coefficient of the Chinese society is about 0.47,which is at a high risk cordon.

The problems mentioned above are only several of all the problems China faces.They can help us better understand the reason why the Chinese tend to believe that China is a colossus with clay feet.Many Chinese people ignore all the evaluations and expectations in the international world.Instead,they criticize the government and elites fiercely and throw blame back and forth at each other intensely.The government was expecting to narrow the regional gap a decade ago and invested considerable resources in the western areas,but the regional economic gap is still widening.Over the years,the government has repeatedly taken intervention measures to control housing prices and even the mandatory restriction policies have been introduced,but the housing price remains unreasonably high for ordinary people.The government has overthrown the policy of making the hospitals fully market-oriented,in the hope of lowering medical costs,but the ordinary people are still complaining about the availability of medical treatment.The government has continued to increase investment in education,but the current situation still suffers criticism,ranging from the rural grass-roots education to higher education.It is difficult for China's foreign affairs department to explain to foreigners why we are in such an awkward position.Every day China's leaders place their main focus on handling all kinds of domestic problems,which leave them with little energy to consider how to make the world's second largest economy more powerful.

China is still one of the world's most compelling emerging economies and China's achievements are worthy of the respect from the world.But foreigners should better understand the current situation in China and the attitude of the Chinese people.Since 1000AD,Chinese philosophy and world view have changed dramatically.Although in dynasties of Song,Yuan,Ming and Qing,China was leading the world's science,technology,economy and enjoying a high level of prosperity,the Chinese always maintained an inward state of mind.For more than 1000 years,the Chinese people were very concerned about the internal affairs,while at the same time continuing to resist the threat of foreign forces.As early as the 14th century,the Chinese fleet had carried out large-scale ocean voyages,but they didn't conduct any global colonial conquests.This is not accidental.China's governors believe that it is not easy to maintain and develop the huge country and the thing itself is a great cause.If China can solve the domestic problems and make the country much more powerful and prosperous,other countries in the world will naturally show their respect to China.In the Chinese political philosophy,this is called“to be virtuous inside and to be benevolent outside.”

Therefore,China has her own version of“isolationism”. As George Washington said in his farewell address,the personal integrity and kindness will eventually become the model of a great country.The Chinese people also believe so and the Chinese political philosophy has advocated that for more than a thousand years.

In fact,many sentences by Washington in this great speech can help us better understand the diplomatic mode of China today.For example,“in the execution of such a plan,nothing is more essential than that permanent,inveterate antipathies against particular nations and passionate attachments for others should be excluded and that in place of them just and amicable feelings towards all should be cultivated.”And “the great rule of conduct for us in regard to foreign nations is, in extending our commercial relations,to have with them as little political connection as possible.”Like what we are trying to describe,there are no essential differences between the thinking,behavior and wisdom of the Chinese and those of other nations in the world.The Chinese foreign policy makers are not likely to have gained any direct guidance from Washington.Instead,they act naturally in accordance with their ancestors' logic.Interestingly,China's practices today are widely criticized.China should certainly accept criticisms.But such criticisms should not be based on any kind of bias.

At last,in observing and discussing China's problems,let's review Washington's advice，“Never become slaves to the animosity.”