Wu Guangqiang

    MARCH 5 is a significant date in China every year, as it is the opening day of the annual session of the National People’s Congress (NPC). The occasion is gaining increasing international attention thanks to China’s rising global influence.

    International media buzzed with interpretations of the 7.5-percent GDP growth target, for example, after it was announced in Premier Wen Jiabao’s government work report delivered to the NPC last week. The 2012 target is the lowest in eight years. In the previous eight years, the targets were 8 percent annually, though the real increase rates were much higher.

    The considerable slowdown will inevitably spook the global market in view of China’s economic size and important role in boosting the world economy. According to World Bank calculations, China’s contribution to world GDP growth increased from 4.6 percent in 2003 to 14.5 percent in 2009, making it the largest contributor to world economic growth.

    China is the largest exporter in the world and will soon overtake the United States as the largest importer. If the United States leaves the rest of the world jittery with every up-and-down in its economy, China, as the planet’s most vibrant powerhouse, could also make the world panic about a potential “hard landing” after a slowdown.

    But a closer, micro-level look at Chinese economic movement reveals more truth. China may have produced in the past few years an asset bubble bigger than anyone thought, so a long and painful process of deflating the bubble is unavoidable.

    Take a stroll around the newly developed residential area just a 10-minute bike ride from my home, and you will find a brand-new “town” made up of hundreds of high-class apartment buildings erected on land reclaimed from Shenzhen Bay. Though the new buildings are indeed impressive with their ultra-modern design and deluxe exterior — complete with well-planned roads, a river and shopping malls — they lack the most important thing: occupants. A few years have passed since completion of most of the buildings, but only about a fifth of the units have been occupied. The average price has doubled, or even quadrupled, making the purchase of these units a game among crazy gamblers. No one knows how long the half-empty “town” will remain so vacant. Developers seem to expect a sudden suspension of the rigorous policy aimed at cooling the red-hot property market. They saw such a miscarried regulatory measure in 2008.

    This time, however, the Central Government seems steadfast in curbing property speculation. As a result, an increasing number of signs show that plummeting sales volume and drying-up cash reserves are chipping away at developers’ hopes. Sporadic sales at generous discounts are appearing.

    A week ago, dozens of angry homeowners tried to storm the sales office of a well-known developer. They claimed to have been cheated because they bought their units at an average price of 35,000 yuan (US$5,547) per square meter last June, and the price has dropped to 25,000 yuan now.

    It’s not an exaggeration to say that China would be in a disaster if the government did not take decisive steps to slow down the pace. GDP mania has left us with numerous “ghost cities,” with massive infrastructure and few inhabitants. Kangbashi, a new addition to Ordos City of the Inner Mongolian Autonomous Region, is the best example. Kangbashi, covering 32 square kilometers, cost 5 billion yuan to complete. The crazy property prices there scare away potential buyers.    

    The skyrocketing land and property prices produced two negative consequences. One is the chain reaction of rising costs in the real economy, forcing many factories to close. The other is an influx of capital from manufacturing into property speculation, which in turn, further inflated the bubble.

    Less speed will bring China more advantages than disadvantages. The potential demands for consumer goods — as well as homes — are huge. When people have more disposable income and better social security, and when inflation is under control, the Chinese market will enjoy a lasting boom, thus benefiting the global market. All these readjustments require a slower growth rate for now.

    (The author is an English tutor and a freelance writer. He can be reached at jw368@163.com.)