Greetings for the new year of 2009, I wish all go well with you and your family.
As a matter of fact, this year we may have more of less than satisfactory things, as does the Chinese Communist Party. So I wish that all of us could turn the dissatisfactory into satisfactory, to overcome the difficulties.
For the wealthy people in China, the economic crisis and shrinking of net worth will be a reality which could not have been avoided. The Chinese old saying: "Every family has a Buddhist scripture which is hard to read" is true for everyone, including the wealthy people. Although the wealthy class will have enough for food and clothing, business operations will be tough to cope with, and the days ahead will be challenging. People are likely wishing that the banks will give out more loans, thus creating a prosperous market with the recovery of the economy that will turn the business around for everyone.
However, as of now, both approaches are difficult. The release of more money by the banks will result in inflation, which causes further devaluation of the currency. This inflation is not guaranteed to be good for export, but will attract stronger trade protectionism and thus result in more resistance to Chinese exports. This may have a result of expansion of the markets which use RMB currency, but it will not be very effective.
Why it will not be very effective? Because most people in the market that use RMB are average workers. The Chinese business structure will not let workers get more salary or wages, so is will have limited effect in expanding this market. If markets both inside and outside China could not be expanded, and even shrink, then the economic depression will gone farther and deeper. Then the economy will not be able to turn around, but only get worse. So people who are running businesses should have a full evaluation of this situation.
The situation of the poor people will be even worse. If the Chinese government applies Keynesian economics to save those businesses which fall into the economic crisis, then there will be inflation. The poor people were already struggling with their low income, and the inflation will be a frost added to the snow. To the working class which has its income less than the average, their life will be hard to maintain. As of now, this is a likely possibility because the international market has already shrunk quite a lot and trade protectionism has being rising quietly. This means that the international market will shrink even more.
If the Chinese government does not expand the internal demand by the release of cash, then tens of millions of migrant workers will not be able to find their jobs when they return to the cities. This will be an unbearable pressure on the Hu-Wen clique which is already in a terrible fix politically. If they are not retarded, they will trade inflation to expand internal demand, in an effort to settle the employment problem of some migrant workers. The result will be that it save the beauricrats, wealthy people and these migrant workers, but makes the other poor people miserable. Unless there is real progress for the political and economic system in China, there lacks a true satisfactory solution for the ongoing problem.
Many friends, both rich and poor, are concerned whether the international market will be able to expand, or at least to resume to where it was a few years ago. I could tell people responsibly here that you should not have this kind of expectation. Historical patterns reveal that when there is an economic crisis, especially a global one, trade protectionism will come to play for sure. All the countries will treat their own market as the highest priority.
I have also gain this impression from my rounds of discussions with politicians in both Europe and America recently. People are all concerned of the trade balance issue, and all notice the influence of trade deficit to the economy of their own country. Even the politicians who have been supporting "free trade" for a long time will say: "although our party's basic principle is free trade, but now..." so and so. This reflects that a strong trade protectionism will be a trend which could not be stopped.
Facing this fact, China has only one solution, which is to expand its internal demand, to expand its internal market which has been malnourished over the last 30 years. What is the root reason for the malnutrition of the Chinese market? It is because the working class, which is the majority of the population, has very low growth of income lagging behind the economic growth. The result is that, on the one hand Chinese economic development has been mainly depending on others' markets; on the other hand the profit has been controlled by a very small class, thus produced a political instability due to the extreme disparity between the rich and the poor.
This kind of economic policy "let some people to get rich first" has produced the current hopeless situation both economically and politically. But the one-party dictatorial political structure is not capable of dissolving this hopeless situation itself. Only a democratic politics which is responsible to the people, could produce a true socialist economic policy which takes care of the majority. A government of the very few, will of course serve for the benefit of the very few only.
Before this political reform, the Chinese democracy movement has taken remedy measures. As the Western countries start to apply trade protectionism, we urged them to include Chinese workers' union rights, which as part of the right of association, information openness, and a free press into trade protection measures. We want to use these ideas to force the Chinese Communist Party to permit workers' unionization, to increase workers' pay, and thus to expand the internal demand and ease up the economic crisis.
For the long term, only when there is development of the union movement will the working class' income grow in the same face as of the economy, thus creating a normal and reasonable economic structure. If the Chinese market could not grow normally, and its economy is unstable, the rich people could go bankrupt easily. So a normal and reasonable economic structure is not just good for the poor people, but also good for the long-term benefit of the wealthy. So mature capitalists in the Western countries also agree to protect workers' rights and socialism. This is the common interest of the whole society. The capitalists of China should learn from the others and get mature. If you keep thinking of put your wealth in the safe territory of the others, why do not you try to turn your own country into a safe territory?