Keeping China’s People Working

May 30, 2010

Marginal Revolution (MR) posted his or her “China fact of the day” and just about everyone who left a comment got it wrong—as usual.

“Of the 22 Chinese corporations listed on the Fortune Global 500, 21 are controlled by China’s central government or state-run banks.” Source of quote: New York Times

I read the The New York Times piece that was quoted by MR and the gist was that China is going through something similar to what Japan did for the four decades after World War II, and that China cannot depend on manufacturing and exporting goods to the rest of the world to maintain a healthy economy indefinitely.  China “needs” to grow a domestic economy that supports itself and that is what the Chinese are trying to do. If they get it wrong, they will pay a steep price.

The first comment to MR’s “China fact of the day” said, “So much for the triumph of capitalism.”

True, so much for capitalism. After all, it was the Republican, Reagan, Bush, Wild West, capitalist system in the US that caused China to start pumping money back into state-run businesses.

Creating Jobs for China's People

In April 2009, Time did a good job explaining why China’s state owned companies are making a comeback.  When the world’s conomy burst and deflated in 2008 thanks to Wall Street greed, exports from China fell by almost 20% and an estimated 300,000 small and medium-sized private sector companies in China collapsed. “The Crisis hits China’s private sector really hard because China’s private sector accounts for a larger share of China’s manufactured exports, says Yasheng Huang, an MIT professor.

What did China do?  China started to put the people who had lost their jobs in the private sector to work in State Run Companies.  Duh! All anyone has to do is see what happened in the United States during the Great Depression when Herbert Hoover was president to understand why China is acting this way to keep people working and earning money.

See Jobless in America and Angry at China

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Lloyd Lofthouse is the author of the award winning novels My Splendid Concubine and Our Hart. He also Blogs at The Soulful Veteran and Crazy Normal.

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