In July, Beijing recorded a surplus of 28.7 billion dollars in trade. But experts doubt that this wealth will benefit citizens. An economic model aimed at promoting the needs of industry to the detriment of the population. New development model is needed to continue growth.

Beijing (AsiaNews / Agencies) - Chinese exports exceeded imports by 28.7 billion dollars in July, a new record since January 2009. However, this data raises concern among economists, who say that the national economy can not depend exclusively on exports and that domestic consumption must grow instead.

In July exports totalled 145.52 billion dollars (+38.1% compared to July 2009) and imports 116.8 billion (+22.7%). Moreover all believe that the increase in exports is due to low production costs (especially with regard to the cost of labour) and the exchange rate of the Yuan artificially kept low. For some time the United States and Europe have insisted that Beijing must appreciate the Yuan to its real value, but Beijing refuses for fear of repercussions on exports. In 2009 China overtook Germany as the world's largest exporter.

Analysts observe that the increase in exports does not match an equal increase in domestic consumption and income per capita. Although imports grew by 22.7% in July, a slowdown compared to June (+34.1%) and many of them are related mainly to the purchase of raw materials and semi-finished components, rather than products for domestic consumption.

In fact, the growth of domestic consumption does not match government forecasts and experts agree that it is driven by robust funding and subsidies granted by Beijing in recent years, rather than a  structural expansion. This will be revealed in data of the second half of 2010, when the momentum of subsidies and public funding will be attenuated.

Michael Pettis, a professor of finance at Guanghua School of Administration at the University of Beijing, notes that the income of the population is only a small proportion of national wealth, which, therefore, has limited possibilities of consumption. Tens of millions of people, such as migrant workers, live on minimum wage, whose purchasing power has declined over the years because of an inflation that is higher than pay increases.

Fan Gang, professor of economics at Peking University and member of the Monetary Policy Committee of the People's Bank of China notes that over the long term economic growth can not continue, if not supported by growth in domestic consumption.

For decades Beijing has mostly favoured investment for the creation of factories and industrial infrastructure, but with little attention to the impact on the environment and with a policy of forced evictions at the expense of residents and benefit of businesses, and with very low cost workforce. Consequently, although the industrialization of the country has soared, the wealth of the population has not grown accordingly. Indeed, sometimes national growth has occurred at the expense of its population; pollution, the destruction of crops and livestock, wild property expropriations, low incomes that are not even aligned with the rising cost of living. The result has been a rise in social unrest, with over 87 thousand protests in 2008 for economic reasons.

This situation has led the wealthy part of the population to save and invest in income generating assets, with stock market speculation and especially real estate: property prices in 70 major cities rose by 10.3% in July, according to the National Bureau of Statistics, despite government intervention to cool the market, fearing the creation of a real-estate bubble that could burst, destroying the savings of entire families.

In order to maintain high exports Beijing has to continue  to undervalue the Yuan, which makes foreign goods and products expensive.  It also has to contain production costs, which happens often to the detriment of the rights of workers and citizens. Experts are waiting to see what new development model Beijing will propose. Meanwhile, authorities have begun to crack down on inefficient firms: two days ago the Minister for Industry and Information Technology ordered the closure by the end of September, of more than 2 thousand companies considered highly pollutant, inefficient and which have failed to comply with safety measures.

• China
• economy
• yuan
• appreciation
• exports
• imports
• poverty
• wealth
• development