Signs of cooling welcome
Call it a slowdown if you like.
China's economic growth did dip slightly from 9.7 percent in the first quarter of this year to 9.5 percent in the second quarter. The latest figure even marked the slowest pace of growth since the third quarter of 2009, when the world economy was just pulling itself out of the worst recession in more than 70 years.
However, while Europe's sovereign debt troubles are escalating and unemployment in the United States remains stubbornly high, the resilience of the Chinese economy is proving greater than expected.
Given the increasing fragility of the ongoing two-speed global recovery, it is surely reasonable to caution against a severe pull back on China's economic growth, which nowadays accounts for an important part of global growth.
It makes no sense to exaggerate the possible risk of a more serious growth setback when Chinese economic data compellingly rules out a hard landing any time soon.
Instead, for Chinese policymakers, the burning task is to stick to tightening policies in the country's uphill fight against accelerating inflation, which is entering a critical phase that allows for no policy pause.
The 9.6-percent year-on-year growth in the first half of this year shows that the world's second largest economy is still on a stable and fast growth track backed by rapid urbanization. More importantly, it indicates that China still has room to tighten policies without choking growth.
With consumer inflation hitting a three-year high of 6.4 percent in June, the country's central bank has hiked interest rates three times so far this year and increased the reserve requirement ratio for domestic banks to a record high of 21.5 percent.
To ease public worries about the soaring inflationary pressures, policymakers have tried hard to demonstrate their firm resolve to corral price hikes with all necessary means.
It is even widely reported that, in absence of new price shocks, the country's consumer inflation may stabilize, if not peak, in the coming months.
A bumper summer harvest in China and a temporary fall in commodity prices in the international market will certainly help the country to rein in inflation.
Nevertheless, it is simply too early to take it for granted that the ongoing surge in consumer prices will come to an end soon given the rising long-term costs of raw materials and labor.
For instance, rather than being mainly a result of supply shocks, the 57.1-percent jump in the price of pork in June over the same period last year, was closely related to the soaring cost of labor and pig feed. Latest statistics show that urban residents' disposable incomes increased by 13.2 percent while rural residents' cash income jumped by 20.4 percent from a year earlier in the first six months.
The shocking fact that China's foreign exchange reserves have risen by more than 30 percent year-on-year by the end of June to about $3.2 trillion also points to more inflationary pressures fueled by inflows of "hot money" into China. That is a cause for more tightening, not less.
Land violations
The Ministry of Supervision and its land and resources counterpart are right when they require local leaders to learn the lessons from past mistakes and do a better job after they meted out administrative disciplinary penalties on 73 local government leaders for violations of land use policies or rules in 2009.
But, of the 73 prefecture level mayors or county magistrates, only one was demoted. The others received a warning or demerit. Even more worrying, several of them have reportedly been promoted to a higher-level position.
Such punishments obviously fall short of the public's expectations and are unlikely to have much effect as a deterrent.
Statistics from the Ministry of Land and Resources show that the total number of cases involving violations in land use reached 23,000 nationwide in the first six months of this year. The cases involved an area of 9,066 hectares, 3,400 hectares of which was arable land.
The number of such cases has decreased in the east and central regions, compared with the same period last year, but it has increased by more than 50 percent in the western regions.
Clearly, the urge for GDP growth by local government leaders in the western regions is much greater than their fear of being given an administrative warning or recorded demerit.
However, it is unfair to conclude that the punishments are meaningless. At least, the two ministries have started to try and rein in the rampant violations in the illegal occupation of land, in particular the occupation of arable land. But the question is whether they will be able to go further in this direction.
Except for more investigations of land violations to see whether some government officials have committed criminal offences, such as taking bribes or embezzling public funds, a mechanism is needed to ensure the administrative or Party disciplinary penalties act as deterrents. For example, anyone who has received an administrative disciplinary punishment should not be eligible for promotion, at least for a certain period of time, and any government official who accumulates a number of such penalties should be demoted or dismissed.
In addition, government leaders should be made accountable for a dereliction of duty if the illegal occupation of arable land is extremely serious. It should not be the case that government officials never receive criminal punishment unless they are directly involved in the illegal acquisition or occupation of arable land.
The two ministries have a long way to go in bringing under control illegal actions involving the sales of land use right, the acquisition of land without central government license and the illegal occupation of arable land.
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