China may be spending 3.5 trillion on stimulus: Its gov't planned economy system is humming along

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Chongqing: Socialism in One City
by Robert Dreyfuss
November 18, 2009

China launched a stimulus of its own, whose size is pretty much unknown. According to Stephen Green of Standard and Chartered Bank, who I met in Shanghai, China's domestic stimulus likely dwarfed the American version. Officially, he says, it was as least $600 billion, but it may have been as much as $3.5 trillion, especially if you count the provincial-level stimulus provided by cities and provinces such as Chongqinq.

"When the financial crisis hit us, a lot of factories closed," says Wen Tianping. Chongqing launched its Warm Winter stimulus plan, spending vast sums, including credit programs to allow many of the 3.5 million unemployed workers to start their own businesses, providing loans and credit guarantees to small business, launching start-up industrial parks, providing direct subsidies to 1,500 businesses, and, of course, using China's ace-in-the-hole: the fact that it is still a communist country with a huge panoply of SOEs (state owned enterprises) that control all of the most important sectors of the economy. The SOE's, says Wen, "were instructed by the government not to cut jobs." Now, not only has Chongqinq recovered fully, but it is currently experiencing a 13 percent growth rate.

In the United States, there is a widely shared perception that China has abandoned socialism and that it has become a Wild West-style, capitalist free-for-all. That's wrong. True, US multinationals, among others, are sidling up cheek by jowl to invest and build factories in China, both for export and to supply China's 1.3 billion consumers. (More than a hundred US Fortune 500 companies operate in Chongqinq already, including Hewlett-Packard, whose laptop assembly plant here will produce 10 million computers a year, Chongqing officials say.) But the fact remains that in China, all of the key industries are government-owned: banks, energy, oil, transport, telecommunications (including China's huge cell phone company, which will soon have its 500 millionth subscriber). China's banking system – which includes four or five giant national banks, 17 mid-sized commercial banks, and about 140 city commercial banks – sailed serenely through the worldwide crisis of 2008-2009. Virtually none of it was exposed to the bad debt and high-flying securities speculation bubble that collapsed AIG, Lehman, and countless other players.

From what I've seen so far, there's no likelihood in the near future that China intends to privatize its core industries. And it's centralized planning system is humming along.

Read the full article at:

http://www.thenation.com/blogs/dreyfuss/498671/chongqing_socialism_in_one_city

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