HONG KONG (Reuters Breakingviews) - China’s Communist Party will hit its self-imposed economic targets in 2020. The government led by Xi Jinping will be able to boast of doubling incomes and real gross domestic product in the decade from 2010, while eliminating extreme poverty. That’s a laudable achievement.
Even China’s harshest critics give it credit for a vast improvement in material living standards. President Hu Jintao set the target of doubling individual spending power in 2012. His successor Xi made the elimination of poverty his signature issue, leaning on officials and companies to pull 13 million people per year above the annual income threshold of 2,300 yuan ($327), in 2010 prices.
Nominal disposable incomes have more than doubled already. Rural residents earned an average of 15,000 yuan in 2018, up from the 6,000 yuan they took home in 2010. City dwellers made nearly 40,000 yuan, up from 19,000 yuan. Official data shows just 1.7% of the population was below the official poverty line in 2018, down from 17% at the beginning of the period.
Yet poverty is relative. Wages have risen in rural areas where 40% of the population lives, but have fallen behind urban centres. Poor provinces have absorbed heavy environmental costs from breakneck industrial growth, while weak education systems left them poorly positioned to cash in on China’s tech boom. Nor has Xi’s Belt and Road Initiative noticeably boosted growth inland. In the western Xinjiang region the poverty rate is nearly eight times the national average, state media says.
As incomes doubled, the money supply tripled to deliver the other target: doubling GDP. Much flowed into silly investments now weighing down balance sheets, constraining stimulus as activity cools. That puts jobs and household consumption – which comprises around 38% of output - at risk again. Yet once-frugal Chinese families now owe the equivalent of 121% of their earnings, a survey by China’s Southwest University of Finance and Economics found - more than Americans. The country ranks 93rd on the United Nation’s 2019 happiness index, roughly where it was in 2012. It’s the most miserable country in East Asia. Having solved poverty, Xi needs to figure out why his people seems so dispirited. There’s no target for that.
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