By Maureen Fan
Washington Post Foreign Service
Monday, December 1, 2008
BEIJING, Nov. 30 -- Chinese President Hu Jintao warned at a weekend meeting of the Communist Party's elite Politburo that China is losing its competitive edge as international demand for its products is reduced, according to official state media reports Sunday.
China's growth rate has been forecast to be about 9 percent in 2008, down from 11.9 percent the year before and close to the 8 percent that economists say China must maintain in order to keep the labor market stable.
"China is under growing tension from its large population, limited resources and environment problems, and needs faster reform of its economic growth pattern to achieve sustainable development," Hu said, according to the People's Daily, the official Communist Party newspaper. He did not provide specifics.
"External demand has obviously weakened, and China's traditional competitive advantage is being gradually weakened" as international demand is reduced, Hu told members of the Political Bureau of the party's Central Committee, according to the state-run New China News Agency.
Protectionism has also started to increase in investment and trade, Hu added. China's export growth in October was 19.2 percent, down from 21.5 percent in September.
His comments came as China prepares to celebrate next month the 30-year anniversary of the opening and reform policies begun by Deng Xiaoping, who led the country from the late 1970s to the early 1990s. The anniversary has prompted both hard-liners and reformers to weigh in on the path China must now take, and Hu is striving to strike a balance.
A recent editorial in the People's Daily, for example, urged China to master information technology in order to get its message out and "safeguard the nation's ideological security." The piece, by a general named Xu Tianliang, underscored a deep debate within the party about how to commemorate the anniversary, said David Bandurski, a researcher at Hong Kong University's Journalism and Media Studies Center.
Michael Pettis, a professor of finance at Peking University, said Chinese exports aren't being priced out of the market. "The problem is a contraction in global demand, and all export economies are going to lose sales. If China tries to 'regain' competitive edge by subsidizing exports -- for example, by depreciating the currency -- that could make global conditions worse by increasing overcapacity, when what we really need is to increase global demand."
In his comments Saturday, Hu said that as the global downturn challenges the pace of economic development, China should "accelerate structural readjustment for sustainable development and stick to reform and opening up."
Efforts should be made to solve problems that concern the people's "fundamental interests" and improve people's living, Hu said, a reference to the central government's fear that growing protests linked to economic issues could be a destabilizing factor.
A strike by about 300 taxi drivers broke out Saturday in Chaozhou city in southern Guangdong province, following similar protests in other cities over rising fuel prices, competition from unlicensed cabs and local government plans to add more cabs.