China Rests For the Holidays

If you happen to be in Beijing, you are no doubt enjoying the great weather, the empty streets and the calm and quiet that has descended upon China’s capital city over this holiday period. The 60th Anniversary of the founding of the People’s Republic of China, combined with Mid-Autumn Festival, have given China’s citizens eight days on which to celebrate these happy events.

Sixty is a particularly big year in China due to the 12-year rotation of the lunar calendar, and the festivities began at 10:00 am on October 1 with an impressive parade down Chang’an Avenue. As is customary on these occasions, the parade was first and foremost a display of China’s military might. Marching male and female soldiers from all branches of service, tanks, missile launchers, nuclear weapon carriers, helicopters and planes — they were all on display for the world to see. President Hu Jintao, like Jiang Zemin and Deng Xiaoping before him, inspected the troops.

It was a proud day for China, particularly when contrasted with the state of the country just 60 years ago. A CCTV newscast I saw said that China’s GDP back then was approximately $18 billion. Even on an inflation-adjusted basis, climbing from such a low base to $4 plus trillion today and the number three ranking in the world, is an impressive accomplishment.

While 2009 began as a potentially bad year for China and the world, China has managed to right its economy and begin once again to grow at impressive rates. Key industries are expanding once again and gaining prominence globally and everyone seems happier than at the start of the year. I found the mood considerably more upbeat when I returned to China two weeks ago after being out for a month.

Perhaps the biggest impact the current administration in China has had is on the lives of the 900 million people or so who still live in the countryside. A friend of mine, whose parents were farmers and who grew up in a cave in one of China’s western provinces, told me of a recent trip he made to his hometown village. Despite the hardships he faced growing up, including trying to learn in a one-room schoolhouse, my friend somehow managed to graduate from a university in China and to be selected to attend graduate school in the United States. For the past 15 years, he has been a top executive at a large, prestigious U.S. company.

“They absolutely love Hu Jintao and Wen Jiabao,” he told me when we had breakfast last week in Beijing. He had just returned from a weeklong visit and was surprised by how positive everyone was at his village. “They don’t tax us, they give us money to buy appliances, and they even give us money to plant crops,” the villagers explained. My friend also noticed all of the activity that was being created by the new road that now runs through the village.

If this one village is representative of what is happening throughout China, then the government’s efforts over the past several years to improve the lot of its poorest citizens have been successful. When China was primarily an agrarian economy, the country’s farmers were the only source of tax revenues. Recognizing the broader source of revenues available from taxing companies in its newly industrialized economy, the government eliminated most land use taxes for farmers several years ago, greatly easing their burden.

As part of the stimulus package put in place last November, emphasis was placed on weaning the economy away from dependence on exports and developing China’s domestic consumption. Infrastructure spending, such as for the road now running through my friend’s village, not only increase domestic spending, but also improve the productivity of everyone that is touched by it. Subsidies for purchases of appliances and vehicles, also part of the stimulus package, have the effect of increasing domestic consumption and causing consumers to trade up to new models that are more environmentally friendly. And payments to farmer to plant crops are an effort to lure back at least some of the young people who have left the farms for employment in the cities.

China has a long way to go to even out its development and bring prosperity to all of its 1.3 billion people, but it seems to have made a good start in this direction. That reason alone gives the country ample reason to celebrate.

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