Olympic hangover dawns

Lavish parties tend to leave a hangover as the problems of daily life, put aside for the celebrations, come crowding back. China’s Olympic party is not likely to prove an exception.

The full legacy of the extraordinary events of 2008 in the People’s Republic of China will take many years to emerge, but in the short term, a number of pressing problems are clear.

The Olympics, with its political project of displaying China’s power as much to its own population as to the rest of the world, has been the prime focus of domestic propaganda for several years, rallying people behind the nationalist theme with the promise to situate China as a restored power. It worked: recent opinion polls have reported a strong feel-good effect with high levels of satisfaction with the government and the direction of the country.

But when the Paralympics closes, the leadership might feel the absence of the mobilising appeal of the whole event, with its power to galvanise the country’s patriotic instincts and minimise the growing divisions in income, prospects and privilege that are the breeding ground of discontent.

A colder, greyer, post-Olympic world is coming into focus, a world in which most of China’s customers are cutting back on spending, inflation at home is running at least at 10% with no relief in sight, eroding the country’s competitiveness, and in which China must face the new challenges of maintaining high growth and social stability with the constraints of limited resources, energy shortages, concern over climate change and environmental exhaustion.

For the past decade, China’s cheap manufactured goods have helped its customers — in particular, the developed economies — to keep inflation low.

Now, with its manufacturing costs rising, China is more likely to be a contributor to increasing prices internationally. Neither energy nor raw materials are likely to get cheaper, and the cost of migrant labour — hitherto the cheap input that has fuelled everything from rebuilding China’s cities to servicing its coastal factories — has risen sharply as industrial zones have spread inland and workers have found jobs closer to home. Employees have already made gains in wages and conditions, and many manufacturers, including Chinese firms, are looking at cheaper production sites.

Like every Asian tiger before it, China, the biggest tiger on the planet, has to meet the challenge of moving up the value chain, from T-shirts to hi-tech, from low-end production to high-value innovation, from energy-intensive to climate-friendly production. In recent years the early coastal industrial zones have begun to enter that stage with waves of factory closures the harbingers of a new phase in the country’s development.

Managing the transition will be a formidable task and a race against the clock. It will demand action on the distortions created by the expensive energy subsidies that militate against efficiency and other anomalies in China’s hybrid economy, all at a time when real incomes — the source of much of the satisfaction registered with the state — are being squeezed. Meanwhile, time is running short in other ways: the future pensions and labour headache of the world’s most rapidly ageing population; an acute water crisis and a gathering health bill from chronic air and water pollution — these are only the most conspicuous items on the list.
There is potentially another unintended consequence of the Olympics.

Millions of people around the world watched a display that presented China as modern, powerful, energetic and rich. The opulence of the ceremonies, the magnificence of the venues and the sheer scale of games were designed to impress and will have changed the perception of China for many, precisely as the government intended.

But China is also engaged in the global negotiations for the post-Kyoto regime and its participation is essential if catastrophic climate change is to be avoided. Like other developing countries, China is pressing the developed world to finance its move to a low-carbon model, an unprecedented deviation from business as usual for a country at China’s stage of development. Under the Kyoto principle of the polluter pays, developed countries — which are responsible for most past emissions — acknowledge this obligation, but it was never going to be easy to persuade sceptical taxpayers to deliver.

Before the Olympics, for most Western taxpayers China was a huge and rapidly developing country of which they knew virtually nothing. After the show, the abiding impression is not of the poverty that continues to afflict much of the nation: those images of deprivation in parts of China that do not measure up to the dream were not on view.

Any nation wants to present its best face at such a time, but it may prove counterproductive. If China is rich enough to stage that show, Western taxpayers may ask, why do they need our money to pursue a track of clean development? Western politicians struggling to make the case for the kind of radical resource transfers required may find themselves wishing the Olympic party had been just a little less opulent. —

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