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The GDP Trap

24 October 2009
 

The following is English translation of the excerpt of an online article posted on forum of China.com by Spring Weeping Willow (春风杨柳万千条):

On Oct. 22, we heard loud roars across the planet over China's announcement that it recorded its gross domestic product growth rate at 8.9% in the third quarter of 2009 compared with the corresponding period last year.

As the news came at a time when the world is experiencing global economic down turn, some effusively praised, and others resentfully denounced.

But what this high GDP growth figure really means to China and the ordinary Chinese people? Now let's look at it from the following five aspects:

1) What's in This GDP?

Under the current economic circumstances in China, the GDP growth was largely achieved through the government stimulus packages totaling at 20 trillion yuans contributed by the central government and the local administrations, mainly for constructing new railways, roads, power plants and public houses. So the growth is not a sign of market recovery but the result of government manoeuvre [which precisely demonstrates the strength of China's unique development model].

2) How the West Views China GDP?

China is damned if GDP is too high, damned if GDP is too low and damned if GDP is not too high or too low. In the eye of the Western powers, if China thrives, it is regarded as a threat to their global dominance; if China declines, it is blamed for dragging down the world's economy. The West has invented the term GDP, and used it excessively as a tool to keep the less developed nations in check. Let's not be fooled.

3) Is Measuring the Economy by GDP Constructive or Destructive?

Using the GDP as a guide to assess economic environment of a nation is quite handy, but if it is taken as the sole measurement of the economic situation, it could be very misleading. In 2007, China's total GDP figure was 24 trillion yuans, and in 2008, it topped 30 trillion. If in 2009, there is one Chinese who, for some reason, spent 4 trillion yuans on purchasing a single chewing gum at a corner store, China's annual growth rate would reach 10% by GDP's measurement. It is that simple. Now after having invested 20 trillion yuans in public sector, the growth rate for the third quarter of 2009 was less than 9 percent. Here legitimate questions should be asked: What happened to the rest of the 11 trillion extra funding? And how come it has failed to show up in the GDP growth? The answer must be that China did have experienced a negative growth in the third quarter, but the fact of economic contraction has hidden behind the illustrious facade crafted through the stimulus packages.

4) What Is China's Role in the Global Economy in the 21st Century?

The evidence suggests that the West has not learned from its past mistakes, since it is too proud to acknowledge its character flaws and too stubborn to amend its code of conduct, hence it is trapped in a loop of a vicious circle. But China has a different cultural heritage which is distinctively observant, reflective and accommodating, and it is willing to and capable of learning from the lessons of others. So the point here is that if we just follow the examples of the West, its failure today will be our fate tomorrow. Therefore we need to find a new way, and to find our own way. And we can.

5) How Chinese People View the GDP?

The ordinary people in China may not necessarily view it as remote as white clouds in a distant sky, but they do think it is not so closely related to their personal economic circumstances. As by now the growth has only benefited a rich few, the GDP figure is just so irrelevant to the majority of Chinese people.

Conclusion: Let's stop paying attention to what the West thinks and talks. Whether they praise us or condemn us, it's just their own games and let them play with themselves.

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