More crazy growth for 2007 - the WTO-column

The year is drawing to a close, so the predictions for the economic growth of next year are high on the agenda of economists, politicians, business people and journalists alike. Despite all the propaganda from Beijing, one of the key policies of the central government, to slow down the dazzling economic growth, seems to have been a major failure. Pessimists estimate for next year growth will be slightly less than ten percent, but that kind of predictions on China always make me rather sceptical.

Apart from government policies there would be enough other reasons to expect a slowdown of this overheated economy. Shortage of resources, rising prices of those resources, a growing environmental crisis, a shortage of qualified talent on the labor market. Despite all these misgivings, there is only one conclusion to draw. Unlike SARS-like accidents happen, next year is going to be even more crazy than this year.

The Chinese banks broke records in raising money on the capital market: they will have to spend that too. Chinese cars sell like hairy crabs, even the stock exchange itself is going up. And when you walk in the streets of Shanghai, apart from the occasional five-star hotel you might have missed, you see new office buildings and even more five-star hotels sprouting up. And that while the rent of hotel rooms is reaching new heights.

This is in Shanghai, the city that not only lost its party secretary but is out of grace with the central government already for a bit longer. Last week, the giant Shanghai Media Group even lauded a writer, Yu Qiuyu, who castigated Shanghai for being too parochial and too narrow minded, to become the cultural equivalent of New York, Paris or Beijing. Mind you, of course he is right, but in the past you could not say these things without getting into trouble. But he obvious smelled the change of winds and started his own little cultural revolution in the city.

So, if Shanghai is out of grace, who is in? Officially, now the country side has priority, but in term of economic development, that has still a long way to go. So, now it is the second-tier cities, the Tianjin's and Chongqing's of China who have an favorable wind coming from Beijing. Manufacturing has already been moving there for almost a decade, but the driving force of consumer spending is now also proliferating, now income in those cities tends to go up.

Until a few years ago, foreign companies trying to sell consumer goods to the Chinese could focus on Beijing, Shanghai and Guangdong. Now, you see especially Chinese companies - I have been following for example the online recruitment firms a bit - are opening dozens of offices all over the country. Rightfully, since some of these cities would equal the population of smaller nations.

With all that in mind: overheating might still be having an effect on the global markets and the environment. But stopping this train seems to be impossible, and in the eyes of many Chinese consumers also very much unwanted.

Fons Tuinstra

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