Op-Ed Contributors

Vested interests eat into economy

By He Bolin (China Daily)
Updated: 2010-06-17 07:55

And foreign capital in industries helps keep tight control on technologies and even the entire business chain. Therefore, many domestic medium- and small-sized enterprises face a lot tougher competition in the market, which reduces their innovation capabilities greatly. Or, they simply have to close shop or merge with bigger companies to avoid bankruptcy.

Yang says domestic private capital, the third special interest group, is centered on the bubbling real estate industry. The circle of GDP-growth-oriented local governments and their dependence on land sales for a big part of their funds, and real estate developers' speculation that has skyrocketed housing prices has become vicious.

Soaring housing prices are creating new and intensifying existing social conflicts. But that is something people can readily see. What they cannot is that excessive speculation in China's housing market has hampered investments in sectors other than the real estate, and even forced investment from other productive sectors to flow into the housing market. This threatens to derail the country's overall industrial development and sustainable growth, Yang says.

Special interest groups undermine China's market economy and socio-political order, and are a big hurdle on the road to further reform. Besides, they are also harming China's competitiveness in the world market, he says.

All the three special interest groups are hand in glove with corrupt officials, without whose help they cannot pursue their special interests. The government has to shoulder the blame for this, because it has failed to prevent special interest groups from mushrooming in almost every corner of the economy. In other words, the government has made little effort to help underprivileged groups because wittingly or unwittingly, most of its policies have favored the privileged.

Yang suggests the government take concrete measures to help the underprivileged to form their own interest groups in order to extract their rightful share of the country's economic fruits. It should introduce competition among the interest groups of the privileged, too, so that the power-money nexus could be weakened. For that, the government has to intensify political reform.

(China Daily 06/17/2010 page9)