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China Reform Monitor - No. 687

China can't shake inflation bug;
One-child policy under review

Edited by Ilan Berman
March 19, 2008

February 19:

While the Bush administration has just imposed a new round of sanctions on the military junta in Burma, few are expecting the UN Security Council to follow suit anytime soon. Guarded, yet again, by its veto-wielding Chinese neighbors at the world body, Myanmar continues to reap the benefits of China’s “non-interference” doctrine. Chinese officials maintain that the country’s “situation” is “moving forward,” and that sanctions “won’t solve the problems in Myanmar,” according to Bloomberg News. However, undeterred by China’s foot-dragging and Burma’s hollow promises to introduce democracy in coming years, the Bush administration has expanded sanctions imposed last year to include Burmese companies dealing in military aircraft and equipment.

After years maintaining enviable price stability, Chinese inflation, at 7.1% [later revised to 8.7%], has hit an 11-year high, alarming authorities who have only limited options to respond. Not since September of 1996 has Beijing faced such rapid price increases, stoked in large part by surges in commodity prices such as grain (5.7%), cooking oil (31.7%), and pork (58.8%), which have hit developing economies worldwide. A devastating winter storm and 20% surge in the money supply last year also hold responsibility, says Xinhua, the official news agency. Official efforts to tamp down inflation – including incremental rises in interest rates, reserve requirements, and the value of the yuan – have thus far been shrugged off by the country’s roaring economy.

February 21:

U.S.-China Pacific relations are often difficult to characterize. On one hand, ties between the two countries militaries are “far warmer” than at the open of the decade, according to the Financial Times, which cites the introduction of “track two” talks that have brought together high-level retired military commanders from both countries in closed-door efforts at fostering cooperation. The trend was highlighted by a recent visit by Adm. Tim Keating, head of U.S. Pacific Command, who explained that conversations with his “pal,” Chinese general Guo Boxiong, consisted of “kidding each other about grandkids and things like that.” However, underneath the surface a handful of unresolved issues – anti-satellite tests, port refusals, and spying accusations – ensure tension between the two superpowers is sure to endure. In a sign of the underlying pressures, the admiral admitted that he was “anxious” to make use of a top-level military hot-line agreed upon last year, but admitted “[the Chinese] just haven’t given us the phone numbers yet.”

February 27:

Chinese plans for a huge water diversion network to supply Beijing for the upcoming Olympic Games threatens to strain local water supplies and cause “social upheaval and environmental harm,” according to An Qiyuan, a senior official from Shaanxi province. The BBC reports Qiyuan is calling for the federal government to “compensate” Shaanxi for the disruptions caused by the project. The Shaanxi branch just one part of a massive, multi-billion dollar water-transfer project designed to bring water from the Yangtze River in the south to the water-starved regions of the north – one Chinese officials hope will be ready in time to meet the 30% Olympic surge in water demand expected in Beijing.

February 28:

Although China recently reiterated its commitment to its “one-child” policy for at least the coming decade, officials in Beijing have begun a rare, critical examination of the controversial policy that may signal a shift in Party thinking. Limiting Chinese citizens to one child (with varying exceptions) has prevented roughly 400 million births, according to the International Herald Tribune – a move which has raised living standards for what is already the world’s largest population. However, the policy is not universally accepted, and has exacerbated tensions between China’s rich – increasingly undaunted by the fines levied for second children – and the country's poor, some of whom are exempt from the regulation entirely. Even more troubling for authorities, the policy has created what some have termed “demographic crisis,” where a drastic and sudden decline in population (the upside-down pyramid) leaves a country with a shortfall of young workers to support a much larger generation of retirees.

Related Categories: Democracy & Governance; China; International Economy

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