Keep govt from falling into hands of elite

• Source: Global Times
• [22:06 March 04 2010]
• Comments

The Chinese government spends over 42 percent of its income in investment, whereas few other countries spend more than 10 percent. There's nothing absolutely wrong with this, but we can't help but ask, is it too much compared to the living standards of ordinary people?

This situation has reached the edge of crisis and it urgently needs a new round of reforms. In order to attract investment, the local government lowers down land prices and provides a variety of preferential policies to investors.

This means that local governments favor high capital investment and exclude those which make intensive use of labor. The behavior of local governments is almost the same as commercial companies, which not only weakens the government's public functions, but also opens the door for special interest groups to take advantage.

Almost all the reforms since 1978 resulted from the unsustainable systems and the edge of crisis. At present, the structural imbalance has also brought the Chinese economy to a dangerous situation: A large amount of current account surplus means not only a wasteful accumulation but also serious inflationary pressures, while the falling of the consumption-GDP ratio means that the economy is growing, but not developing.

Furthermore, the hidden truth is that the benefits of economic growth have not been equally allocated to the general public, but have fallen into the hands of businessmen and officials.

Therefore, we need to start a new round of reform, whose core is the denationalization of the economy and the democratization of politics.

The former eliminates the foundation of the government's commercialization and the latter limits the control of powerful corporations over the government.

The author is a professor of the China Center for Economic Research at Peking University. forum@globaltimes.com.cn