Fat Years - Chan Koonchung [105]
Number Two: Since demand had been created, it had to be supplied. The second set of new policies was to repeal over three thousand regulations governing the manufacturing and service sectors, making it easier for private capital to invest in business, relaxing credit policies for companies catering to domestic demand, and encouraging entrepreneurship.
At the same time, the function of government was transformed in accordance with the slogan: “The officials retreat and the people move in.” The government removed the restrictions on all businesses except those involving national security and government monopolies.
“Now anyone can start a publishing company,” said He Dongsheng, looking straight at Lao Chen. “You can just publish your books without a government-issued book number.”
“But all books still have to be sent in for approval,” countered Lao Chen, “and many subjects are still forbidden.”
“But at least today there are private publishers everywhere,” said He Dongsheng. “There are even Chinese and foreign joint-venture publishing companies, all in complete accord with WTO requirements.”
These policies were extremely effective. In a short time, it looked like everyone in China was in business. Everybody was talking business regardless of age, sex, location, or trade; everybody was trying to make money, looking for talented employees, or being sought out themselves, searching for raw materials or for people to buy or sell some resource. The Chinese people, you know—just give them a chance to do something and they can make a great success of it.
It was almost a miracle how quickly Guangdong, Jiangsu, and Zhejiang’s underused industrial capacity was changed over from manufacture for export to production for the domestic market. New products and new services flooded the market in the space of a couple of months. In six months, China successfully transformed itself from an economy dependent on investment and exports to one driven by domestic demand.
How successful were these policies? asked He Dongsheng rhetorically.
Then he continued: The target for the first phase was to return to the situation of the 1980s, when domestic demand made up half of the GDP, and this goal was accomplished. The optimum target, however, was to equal the situation of the United States before the 1970s, when internal consumption was 60 percent of their GDP, ideal for a large country. After that the Americans went overboard by relying too much on domestic consumption. They let it go over 70 percent of the GDP, they had insufficient investments and exports, debt was excessive, and private individuals had no savings—all this leading to big trouble.
In many areas China can be self-sufficient and doesn’t need to rely too much on exports to foreign countries; in other words, from now on China does not have to be overly influenced by the fluctuations of the U.S. dollar. China’s domestic demand has so far been raised from 35 percent of its GDP only to close to 50 percent. Investment and foreign trade still account for more than 50 percent, and China is still investing too much in capital construction and real estate. Also, after the world economy recovers, the foreign-trade proportion of GDP will still increase slightly, but in general terms the domestic-demand proportion has been significantly readjusted upward. As people’s wages are raised and with good returns on business investments, taxes will also be increased accordingly. China will have successfully eliminated the threat of a domestic economic recession that existed before these policies, and also rectified the most serious structural bias in the economy since the beginning of Reform and Openness.
And the policies killed