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Prospects
An iconic billboard in the quintessential boom city of Shenzhen features Deng’s famous statement that China's “basic line will not waver for 100 years.” If Deng was right, we are less than one-third of the way into the era of “reform and opening.” But four challenges identified by Premier Wen Jiabao in 2010, that growth becomes “unbalanced, unstable, uncoordinated, or unsustainable,” threaten the boom. The key to balance lies in increasing the consumer share of GDP, allowing China to create a modern consumer economy. Stability will depend on the government's ability to address grievances as the gap between winners and losers widens. Coordination is the great test facing the ruling Communist Party, of whether it can manage the politics of growth without fundamental changes to the system. Sustainability is an issue that has global implications, as citizens of a warming planet watch anxiously to see if China is successful in greening the boom. The fifth great challenge, left out by Premier Wen, may be the external one: whether the world is successful in making room for China. |
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A Government Monopoly on Finance LoosensPeriod: Prospects | Winners and Losers
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Click to expand Microfinance in China is very underdeveloped for the moment. Compared to Bangladesh, we are very backwards. Financial services for farmers are very poor because the official financial institutions hoard their savings and do not grant any loans. In other words, the money from the farmers is used to build skyscrapers in the cities, or the Three Gorges Dam, therefore, the countryside is very poor. Their money has been taken from them. The absence of microfinance in China is due to the Chinese government's monopoly on finance. Unlike in the US, where thousands of banks are run by individuals, in China, not only in the countryside, but also in the cities, individuals are not allowed to do business in finance. All of the banks in China are run by the government. Individuals are not allowed to open a bank. Though I have done microfinance in the countryside for 16 years, it remains an illegal business. It is still an illegal business unit which is not under the protection of government law. It is actually an underground organization. Luckily, the government didn't regulate me. If they did, I could have been sent to the prison because it is an illegal business. There have, however, been some changes. The government is starting to allow private funds to provide financial services to businesses in the countryside. Even though it is a very tiny opening, there has been a capital inflow of 100 billion RMB to the Chinese countryside. This is a very important development in the reform of China's financial sector.
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