and how would the Jasmine Revolutions in the Middle East and North Africa impact
As economists we will just focus on the economic impacts by believing that the
chance for any major social unrest in China is extremely small thanks to
China's high GDP growth, high wage growth for unprivileged young workers and
the push on redistribution programs such as social housing. On policy impacts,
while taming inflation is still a priority, we believe China will take
measures to maintain "stable and relatively fast" growth to both
create jobs and narrow income inequality, to resolutely curb home prices to
narrow wealth inequality, to strengthen some pro-growth redistribution programs
such as social housing, and to reduce its dependence on oil imports.
Growth, youth employment and
participants in the Jasmine Revolutions in the Middle East and North Africa are unemployed youth equipped with better
education and access to modern media. They need jobs, and they loathe the ever
widening income inequality. The lesson for China
is that growth is still the predominant priority for China because growth both creates
jobs and narrows income inequality. In China, rapid economic growth now
could narrow income inequality as previously low-paid migrant workers received
a 19.3% pay raise last year and could get another 20% wage increase this year.
In contrast, income growth for the middle-class may only be in single digits.
The major factor behind this differentiating income growth is the changing
demographics and depletion of surplus labor in China.
has no intention to significantly slow the economy if inflation does not
significantly deteriorate further. Even inflation has to pick up on surging oil
might believe it's a result of supply shortage and could show greater tolerance
Wealth effect, home prices and
China's wealth inequality
has been widening, driven partially by surging property prices. That's why China has been
so tough in reining in home prices since April 2010 and has been so serious in
pushing forward social housing programs. In the forthcoming NPC meeting in
early March, China
will provide further details on how to raise labor income and redistribute
wealth to build a more harmonious society.
Oil prices, energy security and
policymakers are now deeply concerned about the country's dependence on oil
imports and its energy security as oil prices surged to above US$100bn. Oil
imports made up 54% (up from 52.5% in 2009) of China's total oil consumption in
2010. That's why the government has scrapped most subsidies on auto purchases,
hiked fuel prices twice since Nov last year, and is making a big push on
alternative energy in China.