Wednesday, June 29, 2011

China pays high price for growth at all costs

MUCH has been said about China's phenomenal growth over the past three decades. Academics and politicians the world over dissect the Chinese model for lessons in national development.

By Ching Cheong, Senior Writer

The recent riots in Inner Mongolia and the spate of riots in other Chinese cities now provide fresh lessons - on the high human and environmental costs that the model entails. The Mongolian troubles also cast doubts on its sustainability.

The unrest at the end of May was the worst in 30 years in the northern Chinese region. Thousands of ethnic Mongolians took to the streets to protest against the death of a herder who had been run over by a truck driven by an ethnic Han.

Beyond the immediate cause, the riots were the result of pent-up resentment boiling over. It was a signal from the Mongolians that there are limits to how far their lands can be exploited and their interests ignored.

On the face of it, Inner Mongolia - also known as the Neimenggu Autonomous Region - has done well. Each year, from 2002 to 2009, its gross domestic product (GDP) grew 18 per cent on average.

Its GDP jumped from 160 billion yuan (S$30.7 billion) in 2001 to 1.16 trillion yuan last year, a growth rate unheard of anywhere else in China. Per capita income also surged, from about 7,200 yuan in 2002 to 33,000 yuan in 2008.

And yet, growing prosperity did not bring about greater happiness.

Quite the opposite, as a recent study by the China Economic Weekly (CEW) has revealed. The study focuses on the 'gold content' of China's GDP for 2010. Developed by Professor Yang Kaizhong, director of the Institute of Regional Economics of Beijing University, the gold-content index is a proxy for measuring happiness. Gold content is derived by dividing per capita disposable income by per capita income. A low 'gold content' would suggest a poor outcome, with a low yield of happiness despite a high per capita income that's fuelled by a lively growth rate.

Significantly, the study found that despite having the country's fastest economic growth, Inner Mongolia has the lowest gold content of GDP. The discrepancy between its theoretical and actual level of income reflects the siphoning off of a substantial amount of its GDP. Simply put, the local people failed to reap the benefits of its extraordinary growth.

Worse still, the huge mining operations - for coal, natural gas and rare earths - have destroyed vast tracts of the region's grasslands and endangered the traditional way of life for nomadic Mongol herders, who have long depended on the pasture lands to feed their animals. Coal is often mined using the cheap but environmentally destructive open cast method. From 1999 to 2004, coal output in Inner Mongolia increased by 168 per cent, way above the national average of 63 per cent.

The death of the Mongol herdsman Mergen in Xilinhot city created such an uproar because he, along with a group of 20 others, had tried to stop coal-hauling trucks from ruining the grazing lands. He died after one of the trucks hit him.

To Mongolian protesters, Mr Mergen had died trying to protect not only the environment but also a tradition under threat. Ethnic Mongols now make up less than 20 per cent of the region's population of 24 million and fear cultural loss under the Han Chinese.

Nor is social unrest uncommon in other parts of China. A parallel can be found in the case of Zhejiang village chief Qian Yunhui who died last year after being hit by a lorry. As he was campaigning against illegal land seizures before his death, this led many villagers and Chinese netizens to openly voice their suspicions that his death was not the simple accident officials made it out to be.

The China model is anchored on certain views propounded by Deng Xiaoping, who is widely credited as the chief architect of China's economic reform.

One - 'development is the hard truth' - is taken to mean that economic growth is paramount. To encourage development, Deng was ready to tolerate income disparity. His remark that one should 'allow some people to get rich first' has opened the way to greater social injustice by its apparent tacit approval.

To promote growth, one needs political and social stability. Deng's comment that 'stability overrides all things else' has evolved into a strong argument against dissenting views.

But too rigid an adherence to Deng's prescription can lead to the idea that the China model means development at all costs, never mind its consequences to the people and to the environment.

The recent crisis in Inner Mongolia is a wake-up call to China that it's time to refine its developmental model.