August 30, 2004

DEBT DEPENDENT:

hina's economic evolution: Private sector hit hardest in efforts to slow overheated economy (PETER S. GOODMAN, 8/30/04, Washington Post)

Only a few months ago, the privately owned Jiangsu Tieben steel plant seemed an archetype of China's emerging entrepreneurialism, the brainchild of a small-town construction worker turned industrialist. Now it is an abandoned void, its half-finished smokestacks standing idle under the summer glare as weeds creep across the grounds and a security guard dozes on a bench in front of locked gates.

Founder Dai Guofang sits in jail facing charges that he violated financial and land-use regulations. Local government officials who secured land for the project have been rebuked by the central government for ignoring land-use regulations, and a Bank of China official has been fired for helping finance the venture.

In the evolving world of Chinese capitalism, officials from Premier Wen Jiabao down have pledged to open the way to a new crop of entrepreneurs, encouraging them to create jobs and expand the economy even as many of the old state-owned companies disintegrate, deprived of the connections to government officials and finance that have sustained them for decades.

But the shutdown of Tieben, along with the slowing of other private projects around the country, has called into question just how far China is willing to go in allowing private capital to compete with state-run enterprises, and how far its central bureaucrats are willing to step back from their traditional role of picking who succeeds economically.

As the government tries to cool an overheated economy, it is tightening credit and cracking down on the sort of corrupt financial and land trading that has been an everyday part of doing business during China's period of swift growth. But the burden of these new policies appears to be falling disproportionately on private entrepreneurs.


One of the ways in which the U.S. debt confuses people is that they think the Chinese are carrying us when in fact we're carrying them. There are no safe places to put your money in China.

Posted by Orrin Judd at August 30, 2004 9:57 AM
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