Wednesday, October 8, 2008

Next Big Step in China?


This autumn is a bit extra chilly. I don't hear the topic of trade policy and China from the presidential debates when turmoil on the Wall Street is all the rage, but let's not lose sight on changes in China that could have potentially significant effect on the world economy for years to come.

China is said to address agriculture policy on the coming parliament conventions. The new policy would "allow agriculture land to circulate". Many believe the wording is a cover for capitalization of the agri-land, and a prelude to complete privatization.

Whether privatize or not, a new wave of land concentration and corporation of agriculture production are in sight. Many of those who are now called "migrant workers" will then simply be called "workers". Many of them, for one reason or another, will sell their land asset and become permanently labor force, whether in urban factories or on the newly formed agriculture corporations. Many of the young in China's rural areas have already left their home. Years after, a young man who wants to start up on agriculture will have the same problem as young ones in Indiana - it's difficult to get into since land will be difficult to lease or purchase. After the private capital pours into agriculture, there will be no longer an excuse to keep the price of agriculture products down, thus changing the relative price of Chinese economy. And since China is so big, it will have profound effect on the world economic structure too. [On a side note, the word "farmer" will no longer has a connotation of slightness in China.]

It's hard to judge if the new direction of the policy will be successful. But if the process in the cities are of any guidance, we can probably anticipate that the increase in productivity and the economy will be there but rights of individuals will be encroached in many cases. As economists would say, economists care not the redistribution problem until there is a crisis.

It all seems remote compared to the financial crisis we are in. However, some argues what happens in China is the single most important factor shaping our changing world. The integration of China into the world economy has realigned world's manufacturing industry and jobs; the cuddling of foreign capital and poor protection of workers rights has put pressure on the negotiation positions American workers are in; etc. The dead-weight will be cast, the credit issuance will resume. The next step of what China is going to do will have prolonged effects for years to come.

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