Date: Tue, 5 Nov 1996 18:57:05 -0500 (EST) From: louisgodena-AT-ids.net (Louis R Godena) Subject: M-I: Re: Mounting Problems with Barkley Rosser Mr Barkley Rosser, indelicately suggests: > Contradictions within the rapidly changing Chinese >economy continue to mount: > 1) A recent study by the World Bank has sharply >lowered the PPP estimate of PRC real income. One >implication is that poverty rates, especially in inner >rural areas, are much higher than many thought. Barkley is probably referring here to an *Economist* piece (October 12th - 18th) that noted two important changes in the way the World Bank measures Chinese poverty. First, it raised the income level below which a Chinese is deemed to be poor from $0.60 to $1.00 per day. This has had the effect of increasing the number of Chinese deemed to be poor from fewer than 100 million to well over 300 million. Second, the report has lowered estimates for Chinese income per person, measured on a purchasing power parity (PPP) basis, which adjusts for the local cost of living. The Bank's 1996 *World Development Report* puts Chinese GDP per person, measured on a PPP basis, at around $2500 in 1994. The new report puts the figure at $1,800. So what? asks a number of Asian economists writing in the *South China Morning Post* (October 14th). What really counts is Chinese wealth at the real exchange rate, not at PPP. They point out that it is misleading in the extreme to extrapolate PPP-based estimates of GDP because the undeniable pace of Chinese growth (especially its burgeoning exports) is bound to result in an appreciation of Chinese currency, which will narrow (if not erase altogether) the gap between a PPP-based GDP and one figured on a nominal basis. And an editorial in Hong Kong's leading daily (*Morning News*, October 12th) frankly accused the World Bank of playing politics when it failed to account for the sudden change in the way it figures the Chinese PPP (the WB cited, simply, "better data"). Both *Vietnam Investment Review* and *Business News China* noted the impending change of commands at both the IMF and the World Bank and indelicately wondered if perhaps Washington may have some role in the abrupt change in status. A discomfited Chinese economy is always good news for America's balance of payments. And, Barkley just wouldn't be Barkley without mentioning those darn SOEs: > 2) Recent reports indicate that losses by SOEs >continue to mount. This continues to put inflationary >budgetary pressure on as these enterprises are propped up >in a soft budget constraint manner. "Losses" on the part of State Owned Enterprises are actually at their lowest rate of decline since 1988, according to figures released last week by the Bank of Hong Kong (*South China Morning Post* October 30th) and confirmed by the World Bank itself. And Chinese inflation is at its lowest level since 1992, if the World Trade Organization is to be believed (of course, much of their data is drawn from the Chinese governemnt itself, especially the Chinese Securities and Regulatory Commission). Barkley's anthem about increased worker exploitation in the Special Economic Zones is based on fact, though his assertion that "local governments" are collaborating with foreign firms (he cites Taiwanese and South Korean firms as especially culpable) in exploiting workers does not jibe with the reports I've seen from the International Labor Organization and independent observers from Sweden and Belgium who have reported on Chinese labor practices in southern China within the past year. Cases of workers being "imprisoned" and "tortured" calls for the citing of some evidence, especially when it is asserted that such conduct had at least tacit approval >from the authorities. Similar charges made last year in Vietnam turned out to be true (*Business News IndoChina* December 1995), leading to an impromptu strike at a sneaker factory outside of Ho Chi Minh City (a Korean foreman had beaten a women employee with a shoe). In this case, however, the offending supervisor was expelled from the country and his employer hit with a hefty fine. We can expect more of this, no doubt, as the local Communist Party organizations in both countries act as de facto "labor brokers", often superceding the actions of trade union officials themselves. I would like Barkley to go into some depth on this, and, while he is at it, generally refrain from writing this kind of post on days when I have worked the night before. Louis Godena --- from list marxism-international-AT-lists.village.virginia.edu ---
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